e10vq
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, 2009
or
     
o
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
(Commission File Number) 001-32410
 
CELANESE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
 
     
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
  98-0420726
(I.R.S. Employer
Identification No.)
     
1601 West LBJ Freeway,
Dallas, TX
(Address of Principal Executive Offices)
  75234-6034
(Zip Code)
 
(Registrant’s telephone number, including area code)
(972) 443-4000
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ     No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer þ  Accelerated filer o  Non-accelerated filer o  Smaller reporting company o
          (Do not check if a smaller reporting company)                             
 
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 22, 2009 was 143,601,100.
 


 

 
CELANESE CORPORATION
 
Form 10-Q
For the Quarterly Period Ended September 30, 2009
 
TABLE OF CONTENTS
 
                 
        Page
 
PART I FINANCIAL INFORMATION
  Item 1.     Financial Statements        
            3  
            4  
            5  
            6  
            7  
  Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations     34  
  Item 3.     Quantitative and Qualitative Disclosures about Market Risk     47  
  Item 4.     Controls and Procedures     47  
PART II OTHER INFORMATION
  Item 1.     Legal Proceedings     49  
  Item 1A.     Risk Factors     49  
  Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds     49  
  Item 3.     Defaults Upon Senior Securities     49  
  Item 4.     Submission of Matters to a Vote of Security Holders     49  
  Item 5.     Other Information     49  
  Item 6.     Exhibits     50  
Signatures     51  
 EX-10.1
 EX-31.1
 EX-31.2
 EX-32.1
 EX-31.1
 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT


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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,  
    2009     2008     2009     2008  
    (In $ millions, except for per share data)  
 
Net sales
    1,304         1,823         3,694         5,537    
Cost of sales
    (1,038 )       (1,490 )       (2,980 )       (4,390 )  
                                         
Gross profit
    266         333         714         1,147    
Selling, general and administrative expenses
    (110 )       (142 )       (338 )       (416 )  
Amortization of intangible assets (primarily customer-related intangible assets)
    (20 )       (19 )       (58 )       (58 )  
Research and development expenses
    (18 )       (18 )       (56 )       (59 )  
Other (charges) gains, net
    (96 )       (1 )       (123 )       (24 )  
Foreign exchange gain (loss), net
    (2 )       (1 )       1         3    
Gain (loss) on disposition of businesses and assets, net
    45         (1 )       41         (1 )  
                                         
Operating profit
    65         151         181         592    
Equity in net earnings (loss) of affiliates
    19         19         44         46    
Interest expense
    (51 )       (65 )       (156 )       (195 )  
Interest income
    2         8         7         27    
Dividend income — cost investments
    19         35         81         138    
Other income (expense), net
    (5 )       4         (2 )       9    
                                         
Earnings (loss) from continuing operations before tax
    49         152         155         617    
Income tax (provision) benefit
    350         12         328         (106 )  
                                         
Earnings (loss) from continuing operations
    399         164         483         511    
                                         
Earnings (loss) from operation of discontinued operations
    -         (8 )       -         (120 )  
Income tax (provision) benefit from discontinued operations
    -         2         -         45    
                                         
Earnings (loss) from discontinued operations
    -         (6 )       -         (75 )  
                                         
Net earnings (loss)
    399         158         483         436    
Less: Net earnings (loss) attributable to noncontrolling
                                       
interests
    -         -         -         (1 )  
                                         
Net earnings (loss) attributable to Celanese Corporation
    399         158         483         437    
Cumulative preferred stock dividends
    (3 )       (3 )       (8 )       (8 )  
                                         
Net earnings (loss) available to common shareholders
    396         155         475         429    
                                         
                                         
Amounts attributable to Celanese Corporation
                                       
Earnings (loss) from continuing operations
    399         164         483         512    
Earnings (loss) from discontinued operations
    -         (6 )       -         (75 )  
                                         
Net earnings (loss)
    399         158         483         437    
                                         
Earnings (loss) per common share — basic
                                       
Continuing operations
    2.76         1.09         3.31         3.36    
Discontinued operations
    -         (0.04 )       -         (0.50 )  
                                         
Net earnings (loss) — basic
    2.76         1.05         3.31         2.86    
                                         
Earnings (loss) per common share — diluted
                                       
Continuing operations
    2.53         1.01         3.08         3.08    
Discontinued operations
    -         (0.04 )       -         (0.45 )  
                                         
Net earnings (loss) — diluted
    2.53         0.97         3.08         2.63    
                                         
Weighted average shares — basic
    143,591,231         147,063,241         143,542,405         149,976,915    
Weighted average shares — diluted
    157,562,916         162,911,689         156,678,265         166,008,010    


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CELANESE CORPORATION AND SUBSIDIARIES
 
UNAUDITED CONSOLIDATED BALANCE SHEETS
 
                     
    As of
    As of
 
    September 30,
    December 31,
 
    2009     2008  
    (In $ millions,
 
    except share amounts)  
 
ASSETS
                   
Current assets
                   
Cash and cash equivalents
    1,293         676    
Trade receivables — third party and affiliates (net of allowance for doubtful accounts — 2009: $21; 2008: $25)
    728         631    
Non-trade receivables
    223         274    
Inventories
    467         577    
Deferred income taxes
    60         24    
Marketable securities, at fair value
    4         6    
Assets held for sale
    2         2    
Other assets
    85         96    
                     
Total current assets
    2,862         2,286    
                     
Investments in affiliates
    811         789    
Property, plant and equipment (net of accumulated depreciation
  — 2009: $1,084; 2008: $1,051)
    2,687         2,470    
Deferred income taxes
    358         27    
Marketable securities, at fair value
    83         94    
Other assets
    328         357    
Goodwill
    806         779    
Intangible assets, net
    315         364    
                     
Total assets
    8,250         7,166    
                     
LIABILITIES AND SHAREHOLDERS’ EQUITY                    
Current liabilities
                   
Short-term borrowings and current installments of long-term debt — third party and affiliates
    265         233    
Trade payables — third party and affiliates
    558         523    
Other liabilities
    606         574    
Deferred income taxes
    16         15    
Income taxes payable
    28         24    
                     
Total current liabilities
    1,473         1,369    
                     
Long-term debt
    3,312         3,300    
Deferred income taxes
    127         122    
Uncertain tax positions
    225         218    
Benefit obligations
    1,157         1,167    
Other liabilities
    1,270         806    
Commitments and contingencies
                   
Shareholders’ equity
                   
Preferred stock, $0.01 par value, 100,000,000 shares authorized (2009 and 2008: 9,600,000 issued and outstanding)
    -         -    
Series A common stock, $0.0001 par value, 400,000,000 shares authorized
(2009: 164,202,786 issued and 143,601,100 outstanding;
2008: 164,107,394 issued and 143,505,708 outstanding)
    -         -    
Series B common stock, $0.0001 par value, 100,000,000 shares authorized
(2009 and 2008: 0 shares issued and outstanding)
    -         -    
Treasury stock, at cost (2009 and 2008: 20,601,686 shares)
    (781 )       (781 )  
Additional paid-in capital
    503         495    
Retained earnings
    1,505         1,047    
Accumulated other comprehensive income (loss), net
    (543 )       (579 )  
                     
Total Celanese Corporation shareholders’ equity
    684         182    
Noncontrolling interests
    2         2    
                     
Total shareholders’ equity
    686         184    
                     
Total liabilities and shareholders’ equity
              8,250                   7,166    
                     
 
See the accompanying notes to the unaudited interim consolidated financial statements.


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CELANESE CORPORATION AND SUBSIDIARIES
 
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF
SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)
 
                     
    Nine Months Ended
 
    September 30, 2009  
    Shares Outstanding     Amount  
    (In $ millions, except share data)  
 
Preferred stock
                   
Balance as of the beginning of the period
    9,600,000          -    
Issuance of preferred stock
            -    
                     
Balance as of the end of the period
    9,600,000          -    
                     
Series A common stock
                   
Balance as of the beginning of the period
    143,505,708          -    
Stock option exercises
    72,601          -    
Purchases of treasury stock, including related fees
            -    
Stock awards
    22,791          -    
                     
Balance as of the end of the period
    143,601,100          -    
                     
Treasury stock
                   
Balance as of the beginning of the period
    20,601,686          (781 )  
Purchases of treasury stock, including related fees
            -    
                     
Balance as of the end of the period
         20,601,686                    (781 )  
                     
Additional paid-in capital
                   
Balance as of the beginning of the period
              495    
Stock-based compensation, net of tax
              7    
Stock option exercises
              1    
                     
Balance as of the end of the period
              503    
                     
Retained earnings
                   
Balance as of the beginning of the period
              1,047    
Net earnings (loss) attributable to Celanese Corporation
              483    
Series A common stock dividends
              (17 )  
Preferred stock dividends
              (8 )  
                     
Balance as of the end of the period
              1,505    
                     
Accumulated other comprehensive income (loss), net
                   
Balance as of the beginning of the period
              (579 )  
Unrealized gain (loss) on securities
              (1 )  
Foreign currency translation
              31    
Unrealized gain (loss) on interest rate swaps
              7    
Pension and postretirement benefits
              (1 )  
                     
Balance as of the end of the period
              (543 )  
                     
Total Celanese Corporation shareholders’ equity
              684    
                     
Noncontrolling interests
                   
Balance as of the beginning of the period
              2    
Net earnings (loss) attributable to noncontrolling interests
              -    
                     
Balance as of the end of the period
              2    
                     
Total shareholders’ equity
              686    
                     
Comprehensive income (loss)
                   
Net earnings (loss)
              483    
Other comprehensive income (loss), net of tax
                   
Unrealized gain (loss) on securities
              (1 )  
Foreign currency translation
              31    
Unrealized gain (loss) on interest rate swaps
              7    
Pension and postretirement benefits
              (1 )  
                     
Total comprehensive income (loss), net of tax
              519    
                     
Comprehensive income (loss) attributable to noncontrolling interests
              -    
                     
Comprehensive income (loss) attributable to Celanese Corporation
                   519    
                     
 
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,  
    2009     2008  
    (In $ millions)  
 
Operating activities
                   
Net earnings (loss)
    483         436    
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
                   
Other charges (gains), net of amounts used
    77         19    
Depreciation, amortization and accretion
    242         272    
Deferred income taxes, net
    (367 )       (5 )  
(Gain) loss on disposition of businesses and assets, net
    (41 )       (2 )  
Other, net
    8         30    
Operating cash provided by (used in) discontinued operations
    (1 )       10    
Changes in operating assets and liabilities:
                   
Trade receivables — third party and affiliates, net
    (79 )       (14 )  
Inventories
    86         (120 )  
Other assets
    40         58    
Trade payables — third party and affiliates
    24         (43 )  
Other liabilities
    (64 )       (296 )  
                     
Net cash provided by operating activities
    408         345    
Investing activities
                   
Capital expenditures on property, plant and equipment
    (130 )       (212 )  
Acquisitions and related fees, net of cash acquired
    (1 )       (1 )  
Proceeds from sale of businesses and assets, net
    168         7    
Deferred proceeds on Ticona Kelsterbach plant relocation
    412         311    
Capital expenditures related to Ticona Kelsterbach plant relocation
    (248 )       (122 )  
Proceeds from sale of marketable securities
    15         147    
Purchases of marketable securities
    -         (128 )  
Settlement of cross currency swap agreement
    -         (93 )  
Other, net
    (25 )       (78 )  
                     
Net cash provided by (used in) investing activities
    191         (169 )  
Financing activities
                   
Short-term borrowings (repayments), net
    31         8    
Proceeds from long-term debt
    -         13    
Repayments of long-term debt
    (56 )       (31 )  
Refinancing costs
    (3 )       -    
Purchases of treasury stock, including related fees
    -         (378 )  
Stock option exercises
    1         18    
Series A common stock dividends
    (17 )       (18 )  
Preferred stock dividends
    (8 )       (8 )  
Other, net
    -         (6 )  
                     
Net cash used in financing activities
    (52 )       (402 )  
Exchange rate effects on cash and cash equivalents
    70         (15 )  
                     
Net increase (decrease) in cash and cash equivalents
    617         (241 )  
Cash and cash equivalents at beginning of period
    676         825    
                     
Cash and cash equivalents at end of period
    1,293         584    
                     
 
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 leading global integrated chemical and advanced 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.
 
Basis of Presentation
 
The unaudited interim consolidated financial statements for the three and nine months ended September 30, 2009 and 2008 contained in this Quarterly Report were prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for all periods presented. The unaudited interim consolidated financial statements and other financial information included in this Quarterly Report, unless otherwise specified, have been presented to separately show the effects of discontinued operations.
 
In the opinion of management, the accompanying unaudited consolidated balance sheets and related unaudited interim consolidated statements of operations, cash flows and shareholders’ equity and comprehensive income (loss) 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 Celanese Corporation and Subsidiaries consolidated financial statements as of and for the year ended December 31, 2008, as filed on February 13, 2009 with the SEC as part of the Company’s Annual Report on Form 10-K (the “2008 Form 10-K”).
 
Operating results for the three and nine months ended September 30, 2009 and 2008 are not necessarily indicative of the results to be expected for the entire year.
 
Estimates and Assumptions
 
The preparation of 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 consolidated financial statements and the reported amounts of revenues, expenses and allocated charges during the reporting period. Significant estimates pertain to impairments of goodwill, intangible assets and other long-lived assets, purchase price allocations, restructuring costs and other (charges) gains, net, income taxes, pension and other postretirement benefits, asset retirement obligations, environmental liabilities and loss contingencies, among others. Actual results could differ from those estimates.
 
Reclassifications
 
The Company has reclassified certain prior period amounts to conform to the current period’s presentation.
 
2.   Recent Accounting Pronouncements
 
In August 2009, the Financial Accounting Standards Board (“FASB”) issued FASB Accounting Standards Update No. 2009-05, Fair Value Measurements and Disclosures (“ASU 2009-05”), which is effective for financial statements issued for interim and annual periods ending after August 2009. ASU 2009-05 amends FASB Accounting Standards Codification (“FASB ASC”) Topic 820-10 (“FASB ASC 820-10”). The update provides clarification on the techniques for measurement of fair value required of a reporting entity when a quoted price in an active market for an identical liability is not available. This update had no impact on the Company’s financial position, results of operations or cash flows.


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In June 2009, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards Codificationtm and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FAS No. 162 (“SFAS No. 168”), which is effective for financial statements issued for interim and annual periods ending after September 15, 2009. SFAS No. 168 created FASB ASC Topic 105-10 (“FASB ASC 105-10”). FASB ASC 105-10 identifies the sources of accounting principles and the framework for selecting principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with US GAAP (the GAAP hierarchy). This standard had no impact on the Company’s financial position, results of operations or cash flows.
 
In May 2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS No. 165”), codified in FASB ASC Topic 855-10, which establishes accounting and disclosure standards for events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It defines financial statements as available to be issued, requiring the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, whether it be the date the financial statements were issued or the date they were available to be issued. The Company adopted SFAS No. 165 upon issuance. This standard had no impact on the Company’s financial position, results of operations or cash flows.
 
In April 2009, the FASB issued FASB Staff Position (“FSP”) No. SFAS 115-2 and SFAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (“FSP No. SFAS 115-2 and SFAS 124-2”), which is codified in FASB ASC Topic 320-10. FSP No. SFAS 115-2 and SFAS 124-2 provides guidance to determine whether the holder of an investment in a debt security for which changes in fair value are not regularly recognized in earnings should recognize a loss in earnings when the investment is impaired. This FSP also improves the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the consolidated financial statements. The Company adopted FSP No. SFAS 115-2 and SFAS 124-2 beginning April 1, 2009. This FSP had no material impact on the Company’s financial position, results of operations or cash flows.
 
In April 2009, the FASB issued FSP No. SFAS 107-1 and Accounting Principles Board (“APB”) Opinion No. APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (“FSP No. SFAS 107-1 and APB 28-1”). FSP No. SFAS 107-1 and APB 28-1, which is codified in FASB ASC Topic 825-10-50, require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. The Company adopted FSP No. SFAS 107-1 and APB 28-1 beginning April 1, 2009. This FSP had no impact on the Company’s financial position, results of operations or cash flows.
 
In April 2009, the FASB issued FSP No. SFAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (“FSP No. SFAS 157-4”). FSP No. SFAS 157-4, which is codified in FASB ASC Topics 820-10-35-51 and 820-10-50-2, provides additional guidance for estimating fair value and emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. The Company adopted FSP No. SFAS 157-4 beginning April 1, 2009. This FSP had no material impact on the Company’s financial position, results of operations or cash flows.
 
In April 2009, the FASB issued FSP No. SFAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies (“FSP No. SFAS 141(R)-1”). FSP No. SFAS 141(R)-1, which is codified in FASB ASC Topic 805, Business Combinations, addresses application issues related to the measurement, accounting and disclosure of assets and liabilities arising from contingencies in a business combination. The Company adopted FSP No. SFAS 141(R)-1 upon issuance. This FSP had no impact on the Company’s financial position, results of operations or cash flows.
 
In December 2008, the FASB issued FSP No. SFAS 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets, (“FSP No. SFAS 132(R)-1”) which is codified in FASB ASC Topic 715-20-50. FSP No. SFAS 132(R)-1 requires enhanced disclosures about the plan assets of a Company’s defined benefit pension and other postretirement plans intended to provide financial statement users with a greater understanding of: 1) how investment allocation decisions are made; 2) the major categories of plan assets; 3) the inputs and valuation techniques used to measure the fair value of plan assets; 4) the effect of fair value measurements using significant unobservable inputs on changes in plan assets for the period; and 5) significant concentrations of risk within plan


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assets. The Company adopted FSP No. SFAS 132(R)-1 on January 1, 2009. This FSP had no impact on the Company’s financial position, results of operations or cash flows.
 
3.   Asset Sales and Plant Closures
 
In July 2009, the Company announced that its wholly-owned French subsidiary, Acetex Chimie, had completed the consultation procedure with the workers council on its “Project of Closure” and social plan related to the Company’s Pardies, France facility pursuant to which the Company announced its formal plan to cease all manufacturing operations and associated activities by December 2009. The Company has agreed with the workers council on a set of measures of assistance aimed at minimizing the effects of the plant’s closing on the Pardies workforce, including training, outplacement and severance.
 
As a result of the Project of Closure, the Company recorded exit costs of $85 million during the three months ended September 30, 2009, which included $58 million in employee termination benefits, $20 million of contract termination costs and $7 million of long-lived impairment losses (see Note 15) to Other charges (gains), net, in the unaudited interim consolidated statements of operations. The fair value of the related held and used long-lived assets is $6 million as of September 30, 2009. In addition, the Company recorded $9 million of accelerated depreciation expense for the nine months ended September 30, 2009 and $3 million of environmental remediation reserves for the three months ended September 30, 2009 related to the shutdown of the Company’s Pardies, France facility. The Pardies, France facility is included in the Acetyl Intermediates segment.
 
In July 2009, the Company completed the sale of its polyvinyl alcohol (“PVOH”) business to Sekisui Chemical Co., Ltd. (“Sekisui”) for a net cash purchase price of $168 million, resulting in a gain on disposition of $34 million. The net cash purchase price excludes the accounts receivable and payable retained by the Company. The transaction includes long-term supply agreements between Sekisui and the Company and therefore, does not qualify for treatment as a discontinued operation. The PVOH business is included in the Industrial Specialties segment.
 
In July 2007, the Company reached an agreement with Babcock & Brown, a worldwide investment firm which specializes in real estate and utilities development, to sell the Company’s Pampa, Texas facility. The Company ceased its chemical operations at the site in December 2008. Proceeds received upon certain milestone events are treated as deferred proceeds and included in noncurrent Other liabilities in the Company’s unaudited consolidated balance sheets until the transaction is complete (expected to be in 2010), as defined in the sales agreement. The Pampa, Texas facility is included in the Acetyls Intermediates segment. In September 2008, the Company performed a discounted cash flow analysis which resulted in $21 million of long-lived asset impairment losses recorded to Other (charges) gains, net, in the unaudited interim consolidated statements of operations during the three months ended September 30, 2008 (see Note 15).
 
As of September 30, 2009 and December 31, 2008, Assets held for sale in the unaudited consolidated balance sheets included an office building with a net book value of $2 million.
 
4.   Inventories
 
                 
    As of
    As of
 
    September 30,
    December 31,
 
    2009     2008  
    (In $ millions)  
 
Finished goods
    336        434   
Work-in-process
    23        24   
Raw materials and supplies
    108        119   
                 
Total
           467               577   
                 


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5.   Marketable Securities, at Fair Value
 
The Company’s captive insurance companies and pension-related trusts hold available-for-sale securities for capitalization and funding requirements, respectively. The Company received proceeds from sales of marketable securities and recorded realized gains (losses) to Other income (expense), net, in the unaudited interim consolidated statements of operations as follows:
 
                                         
    Three months ended
    Nine months ended
 
    September 30,     September 30,  
    2009     2008     2009     2008  
    (In $ millions)  
 
Proceeds from sale of securities
            51         15          147    
                                         
Realized gain on sale of securities
                            3    
Realized loss on sale of securities
            (2 )               (5 )  
                                         
Net realized gain (loss) on sale of securities
            (2 )               (2 )  
                                         
 
The Company reviews all investments for other-than-temporary impairment at least quarterly or as indicators of impairment exist. Indicators of impairment include the duration and severity of the decline in fair value below carrying value as well as the intent and ability to hold the investment to allow for a recovery in the market value of the investment. In addition, the Company considers qualitative factors that include, but are not limited to: (i) the financial condition and business plans of the investee including its future earnings potential, (ii) the investee’s credit rating, and (iii) the current and expected market and industry conditions in which the investee operates. If a decline in the fair value of an investment is deemed by management to be other-than-temporary, the Company writes down the carrying value of the investment to fair value, and the amount of the write-down is included in net earnings. Such a determination is dependent on the facts and circumstances relating to each investment. As of September 30, 2009, the Company had gross unrealized losses of $6 million related to equity securities held for greater than twelve months in the unaudited consolidated balance sheets. The Company recognized $1 million of other-than-temporary impairment losses related to equity securities in the unaudited interim consolidated statements of operations for the three months ended September 30, 2009.
 
The amortized cost, gross unrealized gain, gross unrealized loss and fair values for available-for-sale securities by major security type are as follows:
 
                                         
          Gross
    Gross
       
    Amortized
    Unrealized
    Unrealized
    Fair
 
    Cost     Gain     Loss     Value  
    (In $ millions)  
 
US government debt securities
    28                  -         33     
US corporate debt securities
                    -            
                                         
Total debt securities
    29                  -         34     
Equity securities
    56                  (6 )       50     
Money market deposits and other securities
                    -            
                                         
As of September 30, 2009
    88                  (6 )       87     
                                         
US government debt securities
    35          17          -         52     
US corporate debt securities
                    -            
                                         
Total debt securities
    38          17          -         55     
Equity securities
    55                  (13 )       42     
Money market deposits and other securities
                    -            
                                         
As of December 31, 2008
    96          17          (13 )       100     
                                         


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Fixed maturities as of September 30, 2009 by contractual maturity are shown below. Actual maturities could differ from contractual maturities because borrowers may have the right to call or prepay obligations, with or without call or prepayment penalties.
 
                 
    Cost     Value  
    (In $ millions)  
 
Within one year
           
From one to five years
           
From six to ten years
           
Greater than ten years
    28        33   
                 
Total
              32                  37   
                 
 
Proceeds received from fixed maturities that mature within one year are expected to be reinvested into additional securities upon such maturity.
 
6.   Goodwill and Intangible Assets, Net
 
Goodwill
 
                                         
    Advanced
                         
    Engineered
    Consumer
    Industrial
    Acetyl
       
    Materials     Specialties     Specialties     Intermediates     Total  
    (In $ millions)  
 
As of December 31, 2008
    258        252        34        235        779   
Exchange rate changes
                      11        27   
                                         
As of September 30, 2009
           265               259               36               246               806   
                                         
 
The Company assesses the recoverability of the carrying value of its reporting unit goodwill annually during the third quarter of its fiscal year using June 30 balances or whenever events or changes in circumstances indicate that the carrying amount of the asset may not be fully recoverable. Use of a discounted cash flow valuation model is common practice in impairment testing in the absence of available transactional market evidence to determine the fair value. The key assumptions used in the discounted cash flow valuation model include discount rates, growth rates, cash flow projections and terminal value rates. Discount rates, growth rates and cash flow projections are the most sensitive and susceptible to change as they require significant management judgment. Discount rates are determined by using a weighted average cost of capital (“WACC”). The WACC considers market and industry data as well as Company-specific risk factors for each reporting unit in determining the appropriate discount rates to be used. The discount rate utilized for each reporting unit is indicative of the return an investor would expect to receive for investing in such a business. Operational management, considering industry and Company-specific historical and projected data, develops growth rates and cash flow projections for each reporting unit. Terminal value rate determination follows common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and low long-term growth rates.
 
The market approach uses the Company’s estimates for market growth, its market share, and projected sales or earnings based on historical data, various internal estimates, and certain external sources and are based on assumptions that are consistent with the plans and estimates the Company is using to manage the underlying business. Growth rates and sales or earnings projections are the most sensitive and susceptible to change as they require significant management judgment. The market approach uses comparable public companies and recent publicly disclosed transactions in order to calculate multiples to be applied to each reporting unit’s representative cash flow levels for the last twelve months to calculate an estimated fair value for each reporting unit. Comparable public companies were determined by selecting companies which offered operational and economic comparability in the areas of major importance to the investing public.
 
If the calculated fair value using the combination of the two methods above is less than the current carrying value, impairment of the reporting unit may exist. In connection with the Company’s annual goodwill impairment test performed during the three months ended September 30, 2009, the Company did not record an impairment loss


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related to goodwill as the estimated fair value for each of the Company’s reporting units exceeded the carrying value of the underlying assets by a substantial margin.
 
Valuation methodologies utilized to evaluate goodwill for impairment were consistent with prior periods. Specific assumptions, including discount rates, growth rates, cash flow projections and terminal value rates, were updated at the date of the test to consider current industry and Company-specific risk factors from the perspective of a market participant. The current business environment is subject to evolving market conditions and requires significant management judgment to interpret the potential impact to the Company’s assumptions. To the extent market changes result in adjusted assumptions, impairment losses may occur in future periods.
 
Intangible Assets, Net
 
                                                             
                Customer-
          Covenants
       
    Trademarks
          Related
          not to
       
    and Trade
          Intangible
    Developed
    Compete
       
    names     Licenses     Assets     Technology     and Other     Total  
    (In $ millions)  
 
Gross Asset Value
                                                           
As of December 31, 2008
    82         29         537         12         12         672    
Exchange rate changes
    3         -         22         -         -         25    
                                                             
As of September 30, 2009
    85         29         559         12         12         697    
                                                             
Accumulated Amortization
                                                           
As of December 31, 2008
    -         (3 )       (285 )       (10 )       (10 )       (308 )  
Amortization
    (5 )       (2 )       (49 )       (1 )       (1 )       (58 )  
Exchange rate changes
    -         -         (15 )       -         (1 )       (16 )  
                                                             
As of September 30, 2009
    (5 )       (5 )       (349 )       (11 )       (12 )       (382 )  
                                                             
Net book value
    80         24         210         1         -         315    
                                                             
 
Aggregate amortization expense for intangible assets with finite lives during the three months ended September 30, 2009 and 2008 was $18 million and $19 million, respectively. Aggregate amortization expense for intangible assets with finite lives was $53 million and $58 million for the nine months ended September 30, 2009 and 2008, respectively. In addition, during the three and nine months ended September 30, 2009 the Company recorded accelerated amortization expense of $2 million and $5 million, respectively, related to the AT Plastics trade name which was discontinued August 1, 2009. The trade name is now fully amortized.
 
Estimated amortization expense for the succeeding five fiscal years is $64 million in 2010, $59 million in 2011, $45 million in 2012, $29 million in 2013 and $19 million in 2014.
 
The Company assesses the recoverability of the carrying value of its indefinite-lived intangible assets annually during the third quarter of its fiscal year using June 30 balances or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. Management tests indefinite-lived intangible assets utilizing the relief from royalty method under the income approach to determine the estimated fair value for each indefinite-lived intangible asset. The relief from royalty method estimates the Company’s theoretical royalty savings from ownership of the intangible asset. Key assumptions used in this model include discount rates, royalty rates, growth rates, sales projections and terminal value rates. Discount rates, royalty rates, growth rates and sales projections are the assumptions most sensitive and susceptible to change as they require significant management judgment. Discount rates used are similar to the rates estimated by the WACC considering any differences in Company-specific risk factors. Royalty rates are established by management and are periodically substantiated by third-party valuation consultants. Operational management, considering industry and Company-specific historical and projected data, develops growth rates and sales projections associated with each indefinite-lived intangible asset. Terminal value rate determination follows common methodology of capturing the present value of perpetual sales estimates beyond the last projected period assuming a constant discount rate and low long-term growth rates.


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If the calculated fair value as described above is less than the current carrying value, impairment of the indefinite-lived intangible asset may exist. In connection with the Company’s annual indefinite-lived intangible assets impairment test performed during the three months ended September 30, 2009, the Company recorded an impairment loss of less than $1 million to certain indefinite-lived intangible assets. The fair value of such indefinite-lived intangible assets is $2 million as of September 30, 2009.
 
Valuation methodologies utilized to evaluate indefinite-lived intangible assets for impairment were consistent with prior periods. Specific assumptions, including discount rates, royalty rates, sales projections and terminal value rates, were updated at the date of the test to consider current industry and Company-specific risk factors from the perspective of a market participant. The current business environment is subject to evolving market conditions and requires significant management judgment to interpret the potential impact to the Company’s assumptions. To the extent market changes result in adjusted assumptions, impairment losses may occur in future periods.
 
For the three and nine months ended September 30, 2009, the Company did not renew or extend any intangible assets.
 
7.   Debt
 
                 
    As of
    As of
 
    September 30,
    December 31,
 
    2009     2008  
    (In $ millions)  
 
Short-term borrowings and current installments of long-term debt — third party and affiliates
               
Current installments of long-term debt
    78        81   
Short-term borrowings, principally comprised of amounts due to affiliates
    187        152   
                 
Total
    265        233   
                 
Long-term debt
               
Senior credit facilities: Term loan facility due 2014
    2,802        2,794   
Term notes 7.125%, due 2009
          14   
Pollution control and industrial revenue bonds, interest rates ranging from 5.7% to 6.7%, due at various dates through 2030
    181        181   
Obligations under capital leases and other secured and unsecured borrowings due at various dates through 2054
    240        211   
Other bank obligations, interest rates ranging from 2.3% to 5.3%, due at various dates through 2014
    167        181   
                 
Subtotal
    3,390        3,381   
Less: Current installments of long-term debt
    78        81   
                 
Total
           3,312               3,300   
                 
 
Senior Credit Facilities
 
The Company’s senior credit agreement consists of $2,280 million of US dollar-denominated and €400 million of Euro-denominated term loans due 2014, a $600 million revolving credit facility terminating in 2013 and a $228 million credit-linked revolving facility terminating in 2014. Borrowings under the senior credit agreement bear interest at a variable interest rate based on LIBOR (for US dollars) or EURIBOR (for Euros), as applicable, or, for US dollar-denominated loans under certain circumstances, a base rate, in each case plus an applicable margin. The applicable margin for the term loans and any loans under the credit-linked revolving facility is 1.75%, subject to potential reductions as defined in the senior credit agreement. As of September 30, 2009 the applicable margin was 1.75%. The term loans under the senior credit agreement are subject to amortization at 1% of the initial principal amount per annum, payable quarterly. The remaining principal amount of the term loans is due on April 2, 2014.


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As of September 30, 2009, there were $92 million of letters of credit issued under the credit-linked revolving facility and $136 million remained available for borrowing. As of September 30, 2009, there were no outstanding borrowings or letters of credit issued under the revolving credit facility.
 
On June 30, 2009, the Company entered into an amendment to the senior credit agreement. The amendment reduced the amount available under the revolving credit portion of the senior credit agreement from $650 million to $600 million and increased the first lien senior secured leverage ratio covenant that is applicable when any amount is outstanding under the revolving credit portion of the senior credit agreement as set forth below. Prior to giving effect to the amendment, the maximum first lien senior secured leverage ratio was 3.90 to 1.00. As amended, the maximum senior secured leverage ratio for the following trailing four-quarter periods is as follows:
 
     
    First Lien Senior Secured
    Leverage Ratio
 
September 30, 2009
  5.75 to 1.00
December 31, 2009
  5.25 to 1.00
March 31, 2010
  4.75 to 1.00
June 30, 2010
  4.25 to 1.00
September 30, 2010
  4.25 to 1.00
December 31, 2010 and thereafter
  3.90 to 1.00
 
As a condition to borrowing funds or requesting that letters of credit be issued under that facility, the Company’s first lien senior secured leverage ratio (as calculated as of the last day of the most recent fiscal quarter for which financial statements have been delivered under the revolving facility) cannot exceed a certain threshold as specified above. Further, the Company’s first lien senior secured leverage ratio must be maintained at or below that threshold while any amounts are outstanding under the revolving credit facility. The first lien senior secured leverage ratio is calculated as the ratio of consolidated first lien senior secured debt to earnings before interest, taxes, depreciation and amortization, subject to adjustments identified in the credit agreement.
 
Based on the estimated first lien senior secured leverage ratio for the trailing four quarters at September 30, 2009, the Company’s borrowing capacity under the revolving credit facility is $600 million. As of September 30, 2009, the Company estimates its first lien senior secured leverage ratio to be 4.37 to 1.00 (which would be 5.27 to 1.00 were the revolving credit facility fully drawn). The maximum first lien senior secured leverage ratio under the revolving credit facility for such period is 5.75 to 1.00.
 
The Company’s senior credit agreement also contains a number of restrictions on certain of its subsidiaries, including, but not limited to, restrictions on their ability to incur indebtedness; grant liens on assets; merge, consolidate or sell assets; pay dividends or make other restricted payments; make investments; prepay or modify certain indebtedness; engage in transactions with affiliates; enter into sale-leaseback transactions or hedge transactions; or engage in other businesses. The senior credit agreement also contains a number of affirmative covenants and events of default, including a cross-default to other debt of certain of the Company’s subsidiaries in an aggregate amount equal to more than $40 million and the occurrence of a change of control. Failure to comply with these covenants, or the occurrence of any other event of default, could result in acceleration of the repayment of loans and other financial obligations under the Company’s senior credit agreement.
 
The senior credit agreement is guaranteed by Celanese Holdings LLC, a subsidiary of Celanese Corporation, and certain domestic subsidiaries of the Company’s subsidiary, Celanese US Holdings LLC (“Celanese US”), a Delaware limited liability company, and is secured by a lien on substantially all assets of Celanese US and such guarantors, subject to certain agreed exceptions, pursuant to the Guarantee and Collateral Agreement, dated as of April 2, 2007, by and among Celanese Holdings LLC, Celanese US, certain subsidiaries of Celanese US and Deutsche Bank AG, New York Branch, as Administrative Agent and as Collateral Agent.
 
The Company is in compliance with all of the covenants related to its debt agreements as of September 30, 2009.


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8.  Other Liabilities
 
The components of current Other liabilities are as follows:
 
                     
    As of
    As of
 
      September 30,  
      December 31,  
 
    2009     2008  
    (In $ millions)  
 
Salaries and benefits
    107          107     
Environmental
    17          19     
Restructuring
    102          32     
Insurance
    34          34     
Asset retirement obligations
    19             
Derivatives
    76          67     
Current portion of benefit obligations
    57          57     
Interest
    24          54     
Sales and use tax/foreign withholding tax payable
    10          16     
Uncertain tax positions
               
Other
    154          179     
                     
Total
    606          574     
                     
 
The components of noncurrent Other liabilities are as follows:
 
                     
    As of
    As of
 
      September 30,  
      December 31,  
 
    2009     2008  
    (In $ millions)  
 
Environmental
    86          79     
Insurance
    78          85     
Deferred revenue
    50          56     
Deferred proceeds (see Notes 3 and 19)
    860          370     
Asset retirement obligations
    34          40     
Derivatives
    55          76     
Other
    107          100     
                     
Total
    1,270          806     
                     
 
9.  Benefit Obligations
 
The components of net periodic benefit costs recognized are as follows:
 
                                                                                 
                Postretirement
                Postretirement
 
    Pension Benefits     Benefits     Pension Benefits     Benefits  
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2009     2008     2009     2008     2009     2008     2009     2008  
    (In $ millions)  
 
Service cost
    8         8         -         -         22         24         1         1    
Interest cost
    50         50         5         4         145         149         13         13    
Expected return on plan assets
    (54 )       (56 )       -         -         (156 )       (167 )       -         -    
Recognized actuarial (gain) loss
    -         1         (1 )       (1 )       1         1         (4 )       (3 )  
Settlement (gain) loss
    -         -         -         -         1         -         -         -    
                                                                                 
Total
    4         3         4         3         13         7         10         11    
                                                                                 


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The Company expects to contribute $40 million to its defined benefit pension plans in 2009. As of September 30, 2009, $29 million of contributions have been made. The Company’s estimates of its US defined benefit pension plan contributions reflect the provisions of the Pension Protection Act of 2006.
 
The Company expects to make benefit contributions of $35 million under the provisions of its other postretirement benefit plans in 2009. For the nine months ended September 30, 2009, $20 million of benefit contributions have been made.
 
The Company participates in multiemployer defined benefit plans in Europe covering certain employees. The Company’s contributions to the multiemployer defined benefit plans are based on specified percentages of employee contributions and totaled $4 million for the nine months ended September 30, 2009.
 
10.  Environmental
 
General
 
The Company is subject to environmental laws and regulations worldwide which impose limitations on the discharge of pollutants into the air and water and establish standards for the treatment, storage and disposal of solid and hazardous wastes. The Company believes that it is in substantial compliance with all applicable environmental laws and regulations. The Company is also subject to retained environmental obligations specified in various contractual agreements arising from divestiture of certain businesses by the Company or one of its predecessor companies. The Company’s environmental reserves for remediation matters were $103 million and $98 million as of September 30, 2009 and December 31, 2008, respectively.
 
Remediation
 
Due to its industrial history and through retained contractual and legal obligations, the Company has the obligation to remediate specific areas on its own sites as well as on divested, orphan or US Superfund sites (as defined below). In addition, as part of the demerger agreement between the Company and Hoechst AG (“Hoechst”), a specified portion of the responsibility for environmental liabilities from a number of Hoechst divestitures was transferred to the Company. 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 accounting 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 approximately 50 sites. At most of these sites, numerous companies, including certain companies comprising the Company, or one of its predecessor companies, have been notified that the Environmental Protection Agency, state governing bodies or private individuals consider such companies to be potentially responsible parties (“PRP”) under Superfund or related laws. The proceedings relating to these sites are in various stages. The cleanup process has not been completed at most sites and the status of the insurance coverage for most of these proceedings is uncertain. Consequently, the Company cannot determine accurately its ultimate liability for investigation or cleanup costs at these sites.
 
As events progress at each site for which it has been named a PRP, the Company accrues, as appropriate, a liability for site cleanup. Such liabilities include all costs that are probable and can be reasonably estimated. In establishing these liabilities, the Company considers its shipment of waste to a site, its percentage of total waste shipped to the site, the types of wastes involved, the conclusions of any studies, the magnitude of any remedial actions that may be necessary and the number and viability of other PRPs. Often the Company joins with other PRPs to sign joint defense agreements that settle, among PRPs, each party’s percentage allocation of costs at the site. Although the ultimate liability may differ from the estimate, the Company routinely reviews the liabilities and


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revises the estimate, as appropriate, based on the most current information available. The Company had provisions totaling $10 million and $11 million as of September 30, 2009 and December 31, 2008, respectively.
 
Additional information relating to environmental remediation activity is contained in the footnotes to the Company’s consolidated financial statements included in the 2008 Form 10-K.
 
11.  Shareholders’ Equity
 
Treasury Stock
 
In February 2008, the Company’s Board of Directors authorized the repurchase of up to $400 million of the Company’s Series A common stock. This authorization was increased to $500 million in October 2008. The authorization gives management discretion in determining the conditions under which shares may be repurchased. As of September 30, 2009, the Company had repurchased 9,763,200 shares of its Series A common stock pursuant to this authorization. During the nine months ended September 30, 2009, the Company did not repurchase any shares of its Series A common stock. During the nine months ended September 30, 2008, the Company repurchased 9,763,200 shares of its Series A common stock at an average purchase price of $38.68 per share for a total of $378 million pursuant to this authorization.
 
Purchases of treasury stock reduce the number of shares outstanding and the repurchased shares may be used by the Company for compensation programs utilizing the Company’s stock and other corporate purposes. The Company accounts for treasury stock using the cost method and includes treasury stock as a component of Shareholders’ equity.
 
Other Comprehensive Income (Loss), Net
 
Adjustments to net earnings (loss) to calculate Other comprehensive income (loss), net, totaled $36 million and $(89) million for the nine months ended September 30, 2009 and 2008, respectively. These amounts were net of tax expense of zero for both the nine months ended September 30, 2009 and 2008. Adjustments to net earnings (loss) for comprehensive income (loss) totaled $45 million and $(98) million for the three months ended September 30, 2009 and 2008, respectively. These amounts were net of tax expense of $1 million and $0 for the three months ended September 30, 2009 and 2008, respectively.
 
12.  Commitments and Contingencies
 
The Company is involved in a number of legal proceedings, lawsuits and claims incidental to the normal conduct of business, relating to such matters as product liability, antitrust, past waste disposal practices and release of chemicals into the environment. While it is impossible at this time to determine with certainty the ultimate outcome of these proceedings, lawsuits and claims, the Company is actively defending those matters where the Company is named as a defendant. Additionally, the Company believes it has determined its best estimate, based on the advice of legal counsel, that adequate reserves have been made and that the ultimate outcomes will not have a material adverse effect on the financial position of the Company; however, the ultimate outcome of any given matter may have a material impact on the results of operations or cash flows of the Company in any given reporting period.
 
Plumbing Actions
 
CNA Holdings, LLC (“CNA Holdings”), a US subsidiary of the Company, which included the US business now conducted by the Ticona business included in the Advanced Engineered Materials segment, along with Shell Oil Company (“Shell”), E.I. DuPont de Nemours and Company (“DuPont”) and others, has been a defendant in a series of lawsuits, including a number of class actions, alleging that plastics manufactured by these companies that were utilized in the production of plumbing systems for residential property were defective or caused such plumbing systems to fail. Based on, among other things, the findings of outside experts and the successful use of Ticona’s acetal copolymer in similar applications, CNA Holdings does not believe Ticona’s acetal copolymer was defective or caused the plumbing systems to fail. In many cases CNA Holdings’ potential future exposure may be limited by invocation of the statute of limitations since CNA Holdings ceased selling the resin for use in the plumbing systems in site-built homes during 1986 and in manufactured homes during 1990.


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In November 1995, CNA Holdings, DuPont and Shell entered into national class action settlements which called for the replacement of plumbing systems of claimants who have had qualifying leaks, as well as reimbursements for certain leak damage. In connection with such settlements, the three companies had agreed to fund these replacements and reimbursements up to an aggregate amount of $950 million. In 2002, based on projections that the cap would be exceeded, Shell and the Company added $75 million for a total of $1.025 billion. The cap was further increased by $78 million to $1.103 billion primarily as a result of funds transferred from the US Brass Trust. Additional funds transferred from the US Brass Trust may further increase the cap in the future. Excess funds remaining upon complete dissolution of the class action are payable to Shell and the Company.
 
During the period between 1995 and 2001, CNA Holdings was also named as a defendant in the following putative class actions:
 
  •   Cox, et al. v. Hoechst Celanese Corporation, et al., No. 94-0047 (Chancery Ct., Obion County, Tennessee) (class was certified).
 
  •   Couture, et al. v. Shell Oil Company, et al., No. 200-06-000001-985 (Quebec Superior Court, Canada).
 
  •   Dilday, et al. v. Hoechst Celanese Corporation, et al., No. 15187 (Chancery Ct., Weakley County, Tennessee).
 
  •   Furlan v. Shell Oil Company, et al., No. C967239 (British Columbia Supreme Court, Vancouver Registry, Canada).
 
  •   Gariepy, et al. v. Shell Oil Company, et al., No. 30781/99 (Ontario Court General Division, Canada).
 
  •   Shelter General Insurance Co., et al. v. Shell Oil Company, et al., No. 16809 (Chancery Ct., Weakley County, Tennessee).
 
  •   St. Croix Ltd., et al. v. Shell Oil Company, et al., No. 1997/467 (Territorial Ct., St. Croix Division, the US Virgin Islands).
 
  •   Tranter v. Shell Oil Company, et al., No. 46565/97 (Ontario Court General Division, Canada).
 
In addition, between 1994 and 2008 CNA Holdings was named as a defendant in numerous non-class actions filed in Florida, Georgia, Louisiana, Mississippi, New Jersey, Tennessee and Texas, the US Virgin Islands and Canada of which nine are currently pending. In all of these actions, the plaintiffs have sought recovery for alleged damages caused by leaking polybutylene plumbing. Damage amounts have generally not been specified but these cases generally do not involve (either individually or in the aggregate) a large number of homes.
 
As of September 30, 2009 and December 31, 2008, the Company had remaining accruals of $62 million and $64 million, respectively, of which $1 million is included in current Other liabilities in the unaudited consolidated balance sheets.
 
The Company reached settlements with CNA Holdings’ insurers specifying their responsibility for these claims. During the year ended December 31, 2007, the Company received $23 million of insurance proceeds from various CNA Holdings’ insurers as full satisfaction for their responsibility for these claims. During the year ended December 31, 2008, the Company received less than $1 million from insurers. During the nine months ended September 30, 2009, the Company recognized a $2 million decrease in legal reserves for plumbing claims for which the statute of limitations has expired and received $1 million of insurance recoveries associated with plumbing cases.
 
Plumbing Insurance Indemnifications
 
Celanese GmbH entered into agreements with insurance companies related to product liability settlements associated with Celcon® plumbing claims. These agreements, except those with insolvent insurance companies, require the Company to indemnify and/or defend these insurance companies in the event that third parties seek additional monies for matters released in these agreements. The indemnifications in these agreements do not provide for time limitations.
 
In certain of the agreements, Celanese GmbH received a fixed settlement amount. The indemnities under these agreements generally are limited to, but in some cases are greater than, the amount received in settlement from the


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insurance company. The maximum exposure under these indemnifications is $95 million. Other settlement agreements have no stated limits.
 
There are other agreements whereby the settling insurer agreed to pay a fixed percentage of claims that relate to that insurer’s policies. The Company has provided indemnifications to the insurers for amounts paid in excess of the settlement percentage. These indemnifications do not provide for monetary or time limitations.
 
Sorbates Antitrust Actions
 
In May 2002, the European Commission informed Hoechst of its intent to officially investigate the sorbates industry. In early January 2003, the European Commission served Hoechst, Nutrinova, Inc., a US subsidiary of Nutrinova Nutrition Specialties & Food Ingredients GmbH and previously a wholly owned subsidiary of Hoechst (“Nutrinova”), and a number of competitors of Nutrinova with a statement of objections alleging unlawful, anticompetitive behavior affecting the European sorbates market. In October 2003, the European Commission ruled that Hoechst, Chisso Corporation, Daicel Chemical Industries Ltd. (“Daicel”), The Nippon Synthetic Chemical Industry Co. Ltd. and Ueno Fine Chemicals Industry Ltd. operated a cartel in the European sorbates market between 1979 and 1996. The European Commission imposed a total fine of €138 million on such companies, of which €99 million was assessed against Hoechst and its legal successors. The case against Nutrinova was closed. Pursuant to the Demerger Agreement with Hoechst, Celanese GmbH was assigned the obligation related to the sorbates antitrust matter; however, Hoechst, and its legal successors, agreed to indemnify Celanese GmbH for 80% of any costs Celanese GmbH incurred relative to this matter. Accordingly, Celanese GmbH recognized a receivable from Hoechst from this indemnification. In June 2008, the Court of First Instance of the European Communities (Fifth Chamber) reduced the fine against Hoechst to €74.25 million and in July 2008, Hoechst paid the €74.25 million fine. In August 2008, the Company paid Hoechst €17 million, including interest of €2 million, in satisfaction of its 20% obligation with respect to the fine.
 
Based on the advice of external counsel and a review of the existing facts and circumstances relating to the sorbates antitrust matters, including the settlement of the European Union’s investigation, as well as civil claims filed and settled, the Company released its accruals related to the settled sorbates antitrust matters and the indemnification receivables resulting in a gain of $8 million, net, for the year ended December 31, 2008.
 
In addition, in 2004 a civil antitrust action styled Freeman Industries LLC v. Eastman Chemical Co., et. al. was filed against Hoechst and Nutrinova, in the Law Court for Sullivan County in Kingsport, Tennessee. The plaintiff sought monetary damages and other relief for alleged conduct involving the sorbates industry. The trial court dismissed the plaintiff’s claims and upon appeal the Supreme Court of Tennessee affirmed the dismissal of the plaintiff’s claims. In December 2005, the plaintiff lost an attempt to amend its complaint and the entire action was dismissed with prejudice by the trial court. Plaintiff’s counsel has subsequently filed a new complaint with new class representatives in the District Court of the District of Tennessee. The Company’s motion to strike the class allegations was granted in April 2008 and the plaintiff’s request to appeal the ruling is currently pending.
 
Acetic Acid Patent Infringement Matters
 
On May 9, 1999, Celanese International Corporation filed a private criminal action styled Celanese International Corporation v. China Petrochemical Development Corporation against China Petrochemical Development Corporation (“CPDC”) in the Taiwan Kaoshiung District Court alleging that CPDC infringed Celanese International Corporation’s patent covering the manufacture of acetic acid. Celanese International Corporation also filed a supplementary civil brief which, in view of changes in Taiwanese patent laws, was subsequently converted to a civil action alleging damages against CPDC based on a period of infringement of ten years, 1991-2000, and based on CPDC’s own data which was reported to the Taiwanese securities and exchange commission. Celanese International Corporation’s patent was held valid by the Taiwanese patent office. On August 31, 2005, the District Court held that CPDC infringed Celanese International Corporation’s acetic acid patent and awarded Celanese International Corporation approximately $28 million (plus interest) for the period of 1995 through 1999. In October 2008, the High Court, on appeal, reversed the District Court’s $28 million award to the Company. The Company appealed to the Superior Court in November 2008, and the court remanded the case to the IP court on June 4, 2009. On January 16, 2006, the District Court awarded Celanese International Corporation $800,000 (plus interest) for the


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year 1990. In January 2009, the High Court, on appeal, affirmed the District Court’s award and CPDC appealed on February 5, 2009. On June 29, 2007, the District Court awarded Celanese International Corporation $60 million (plus interest) for the period of 2000 through 2005. CPDC appealed this ruling and on July 21, 2009, the High Court ruled in CPDC’s favor. The Company appealed this decision to the High Court in August 2009.
 
Domination Agreement
 
On October 1, 2004, a Domination Agreement between Celanese GmbH and Celanese Europe Holding GmbH & Co. KG (“the Purchaser”) became operative. When the Domination Agreement became operative, the Purchaser became obligated to offer to acquire all outstanding Celanese GmbH shares from the minority shareholders of Celanese GmbH in return for payment of fair cash compensation. The amount of this fair cash compensation was determined to be €41.92 per share, plus interest, in accordance with applicable German law. Until the Squeeze-Out was registered in the commercial register in Germany on December 22, 2006, any minority shareholder who elected not to sell its shares to the Purchaser was entitled to remain a shareholder of Celanese GmbH and to receive from the Purchaser a gross guaranteed annual payment on its shares of €3.27 per Celanese GmbH share less certain corporate taxes in lieu of any dividend.
 
The Domination Agreement could not be terminated by the Purchaser in the ordinary course of business until September 30, 2009. The Company’s subsidiaries, Celanese International Holdings Luxembourg S.à r.l. (“CIH”), formerly Celanese Caylux Holdings Luxembourg S.C.A., and Celanese US, have each agreed to provide the Purchaser with financing to strengthen the Purchaser’s ability to fulfill its obligations under, or in connection with, the Domination Agreement and to ensure that the Purchaser will perform all of its obligations under, or in connection with, the Domination Agreement when such obligations become due, including, without limitation, the obligation to compensate Celanese GmbH for any statutory annual loss incurred by Celanese GmbH during the term of the Domination Agreement. If CIH and/or Celanese US are obligated to make payments under such guarantees or other security to the Purchaser, the Company may not have sufficient funds for payments on its indebtedness when due. The Company has not had to compensate Celanese GmbH for an annual loss for any period during which the Domination Agreement has been in effect.
 
The amounts of the fair cash compensation and of the guaranteed annual payment offered under the Domination Agreement are under court review in special award proceedings. As a result of these proceedings, either amount could be increased by the court so that all former Celanese GmbH shareholders, including those who have already tendered their shares into the mandatory offer and have received the fair cash compensation could claim the respective higher amounts. Certain former Celanese GmbH shareholders may initiate such proceedings also with respect to the Squeeze-Out compensation. In this case, former Celanese GmbH shareholders who ceased to be shareholders of Celanese GmbH due to the Squeeze-Out are entitled, pursuant to a settlement agreement between the Purchaser and certain former Celanese GmbH shareholders, to claim for their shares the higher of the compensation amounts determined by the court in these different proceedings. Payments these shareholders already received as compensation for their shares will be offset so that those shareholders who ceased to be shareholders of Celanese GmbH due to the Squeeze-Out are not entitled to more than the higher of the amount set in the two court proceedings.
 
Shareholder Litigation
 
The amounts of the fair cash compensation and of the guaranteed annual payment offered under the Domination Agreement may be increased in special award proceedings initiated by minority shareholders, which may further reduce the funds the Purchaser can otherwise make available to the Company. As of March 30, 2005, several minority shareholders of Celanese GmbH had initiated special award proceedings seeking the court’s review of the amounts of the fair cash compensation and of the guaranteed annual payment offered under the Domination Agreement. As a result of these proceedings, the amount of the fair cash consideration and the guaranteed annual payment offered under the Domination Agreement could be increased by the court so that all minority shareholders, including those who have already tendered their shares into the mandatory offer and have received the fair cash compensation could claim the respective higher amounts. The court dismissed all of these proceedings in March 2005 on the grounds of inadmissibility. Thirty-three plaintiffs appealed the dismissal, and in January 2006, twenty-three of these appeals were granted by the court. They were remanded back to the court of first instance, where the


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valuation will be further reviewed. On December 12, 2006, the court of first instance appointed an expert to help determine the value of Celanese GmbH. In the first quarter of 2007, certain minority shareholders that received €66.99 per share as fair cash compensation also filed award proceedings challenging the amount they received as fair cash compensation.
 
The Company received applications for the commencement of award proceedings filed by 79 shareholders against the Purchaser with the Frankfurt District Court requesting the court to set a higher amount for the Squeeze-Out compensation. The motions are based on various alleged shortcomings and mistakes in the valuation of Celanese GmbH done for purposes of the Squeeze-Out. On May 11, 2007, the court of first instance appointed a common representative for those shareholders that have not filed an application on their own. The Company anticipates a report by the valuation expert before the end of 2009.
 
Polyester Staple Antitrust Litigation
 
CNA Holdings, the successor in interest to Hoechst Celanese Corporation (“HCC”), Celanese Americas Corporation and Celanese GmbH (collectively, the “Celanese Entities”) and Hoechst, the former parent of HCC, were named as defendants in two actions (involving 25 individual participants) filed in September 2006 by US purchasers of polyester staple fibers manufactured and sold by HCC. The actions allege that the defendants participated in a conspiracy to fix prices, rig bids and allocate customers of polyester staple sold in the United States. These actions were consolidated in a proceeding by a Multi-District Litigation Panel in the United States District Court for the Western District of North Carolina styled In re Polyester Staple Antitrust Litigation, MDL 1516. On June 12, 2008 the court dismissed these actions against all Celanese Entities in consideration of a payment by the Company of $107 million. This proceeding related to sales by the polyester staple fibers business which Hoechst sold to KoSa, Inc. in 1998. Accordingly, the impact of this settlement is reflected within discontinued operations in the consolidated statements of operations. The Company also previously entered into tolling arrangements with four other alleged US purchasers of polyester staple fibers manufactured and sold by the Celanese Entities. These purchasers were not included in the settlement and one such company filed suit against the Company in December 2008 in the Western District of North Carolina entitled Milliken & Company v. CNA Holdings, Inc., Celanese Americas Corporation and Hoechst AG (No. 8-CV-00578). The Company is actively defending this matter.
 
In 1998, HCC sold its polyester staple business as part of the sale of its Film & Fibers Division to KoSa B.V., f/k/a Arteva B.V. and a subsidiary of Koch Industries, Inc. (“KoSa”). In March 2001 the US Department of Justice (“DOJ”) commenced an investigation of possible price fixing regarding the sales of polyester staple fibers in the US subsequent to the period the Celanese Entities were engaged in the polyester staple fiber business. The Celanese Entities were never named in the DOJ action. As a result of the DOJ action, during August of 2002, Arteva Specialties, S.a.r.l., a subsidiary of KoSa, (“Arteva Specialties”) pled guilty to criminal violation of the Sherman Act related to anti-competitive conduct occurring after the 1998 sale of the polyester staple fiber business and paid a fine of $29 million. In a complaint pending against the Celanese Entities and Hoechst in the United States District Court for the Southern District of New York, Koch Industries, Inc., KoSa, Arteva Specialties and Arteva Services S.a.r.l. seek damages in excess of $371 million which includes indemnification for all damages related to the defendants’ alleged participation in, and failure to disclose, the alleged conspiracy during due diligence. The Company is actively defending this matter.
 
Guarantees
 
The Company has agreed to guarantee or indemnify third parties for environmental and other liabilities pursuant to a variety of agreements, including asset and business divestiture agreements, leases, settlement agreements and various agreements with affiliated companies. Although many of these obligations contain monetary and/or time limitations, others do not provide such limitations.
 
As indemnification obligations often depend on the occurrence of unpredictable future events, the future costs associated with them cannot be determined at this time.


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The Company has accrued for all probable and reasonably estimable losses associated with all known matters or claims that have been brought to its attention. These known obligations include the following:
 
• Demerger Obligations
 
The Company has obligations to indemnify Hoechst, and its legal successors, for various liabilities under the Demerger Agreement, including for environmental liabilities associated with contamination arising under 19 divestiture agreements entered into by Hoechst prior to the demerger.
 
The Company’s obligation to indemnify Hoechst, and its legal successors, is subject to the following thresholds:
 
  •   The Company will indemnify Hoechst, and its legal successors, against those liabilities up to €250 million;
 
  •   Hoechst, and its legal successors, will bear those liabilities exceeding €250 million; however, the Company will reimburse Hoechst, and its legal successors, for one-third of those liabilities for amounts that exceed €750 million in the aggregate.
 
The aggregate maximum amount of environmental indemnifications under the remaining divestiture agreements that provide for monetary limits is approximately €750 million. Three of the divestiture agreements do not provide for monetary limits.
 
Based on the estimate of the probability of loss under this indemnification, the Company had reserves of $33 million and $27 million as of September 30, 2009 and December 31, 2008, respectively, for this contingency. Where the Company is unable to reasonably determine the probability of loss or estimate such loss under an indemnification, the Company has not recognized any related liabilities.
 
The Company has also undertaken in the Demerger Agreement to indemnify Hoechst and its legal successors for 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 provided for any reserves associated with this indemnification as it is not probable or estimable. The Company has not made any payments to Hoechst or its legal successors during the nine months ended September 30, 2009 or 2008 in connection with this indemnification.
 
• 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.
 
The Company has divested numerous businesses, investments and facilities through agreements containing indemnifications or guarantees to the purchasers. Many of the obligations contain monetary and/or time limitations, ranging from one year to thirty years. The aggregate amount of guarantees provided for under these agreements is approximately $2.3 billion as of September 30, 2009. Other agreements do not provide for any monetary or time limitations.
 
Based on historical claims experience and its knowledge of the sites and businesses involved, the Company believes that it is adequately reserved for these matters. The Company has reserves related to these matters in the aggregate of $33 million as of both September 30, 2009 and December 31, 2008.
 
• Other Obligations
 
The Company is secondarily liable under a lease agreement that the Company assigned to a third party. The lease expires on April 30, 2012. The lease liability for the period from October 1, 2009 to April 30, 2012 is estimated to be approximately $19 million.


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The Company has agreed to indemnify various insurance carriers for amounts not in excess of the settlements received from claims made against these carriers subsequent to the settlement. The aggregate amount of guarantees under these settlements which is limited in term is approximately $10 million.
 
Asbestos Claims
 
As of September 30, 2009, Celanese Ltd. and/or CNA Holdings, LLC, both US subsidiaries of the Company, are defendants in approximately 517 asbestos cases. During the nine months ended September 30, 2009, 41 new cases were filed against the Company and 84 cases were resolved. Because many of these cases involve numerous plaintiffs, the Company is subject to claims significantly in excess of the number of actual cases. The Company has reserves for defense costs related to claims arising from these matters. The Company believes that there is no significant exposure related to these matters.
 
Purchase Obligations
 
In the normal course of business, the Company enters into commitments to purchase goods and services over a fixed period of time. The Company maintains a number of “take-or-pay” contracts for purchases of raw materials and utilities. As of September 30, 2009, there were outstanding future commitments of $1,854 million under take-or-pay contracts. The Company recognized $20 million of losses related to take-or-pay contract termination costs for the three months ended September 30, 2009 related to the Company’s Pardies, France Project of Closure (see Note 15). The Company does not expect to incur any material losses under take-or-pay contractual arrangements unrelated to the Pardies, France Project of Closure.
 
13.  Derivative Financial Instruments
 
To reduce the interest rate risk inherent in the Company’s variable rate debt, the Company utilizes interest rate swap agreements to convert a portion of the variable rate debt to a fixed rate obligation. These interest rate swap agreements are designated as cash flow hedges. The notional value of the Company’s US dollar interest rate swap agreements as of September 30, 2009 and December 31, 2008 was $1.6 billion and $1.8 billion, respectively. The notional value of the Company’s Euro interest rate swap agreement was €150 million at both September 30, 2009 and December 31, 2008.
 
If an interest rate swap agreement is terminated prior to its maturity, the amount previously recorded in Accumulated other comprehensive income (loss), net, is recognized into earnings over the period that the hedged transaction impacts earnings. If the hedging relationship is discontinued because it is probable that the forecasted transaction will not occur according to the original strategy, any related amounts previously recorded in Accumulated other comprehensive income (loss), net are recognized into earnings immediately.
 
To protect the foreign currency exposure of a net investment in a foreign operation, the Company entered into cross currency swaps with certain financial institutions in 2004. The cross currency swaps and the Euro-denominated portion of the senior term loan were designated as a hedge of a net investment of a foreign operation. Under the terms of the cross currency swap arrangements, the Company paid approximately €13 million in interest and received approximately $16 million in interest on June 15 and December 15 of each year. Upon maturity of the cross currency swap agreements in June 2008, the Company owed €276 million ($426 million) and was owed $333 million. In settlement of the obligation, the Company paid $93 million (net of interest of $3 million) in June 2008.
 
During the year ended December 31, 2008, the Company dedesignated €385 million of the €400 Euro-denominated portion of the term loan, previously designated as a hedge of a net investment of a foreign operation. The remaining €15 million Euro-denominated portion of the term loan was dedesignated as a hedge of a net investment of a foreign operation in June 2009. Prior to the dedesignations, the Company had been using external derivative contracts to offset foreign currency exposures on certain intercompany loans. As a result of the dedesignations, the foreign currency exposure created by the Euro-denominated term loan is expected to offset the foreign currency exposure on certain intercompany loans, decreasing the need for external derivative contracts and reducing the Company’s exposure to external counterparties.


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The Company enters into foreign currency forwards and swaps to minimize its exposure to foreign currency fluctuations. Through these instruments, the Company mitigates its foreign currency exposure on transactions with third party entities as well as intercompany transactions. The forward currency forwards and swaps are not designated as hedges under FASB ASC 815, Derivatives and Hedging. Gains and losses on foreign currency forwards and swaps entered into to offset foreign exchange impacts on intercompany balances are classified as Other income (expense), net, in the unaudited interim consolidated statements of operations. Gains and losses on foreign currency forwards and swaps entered into to offset foreign exchange impacts on all other assets and liabilities are classified as Foreign exchange gain (loss), net, in the unaudited interim consolidated statements of operations. The notional value of the Company’s foreign currency forwards and swaps as of September 30, 2009 and December 31, 2008 were both $1 billion.
 
The following table presents information regarding changes in the fair value of the Company’s derivative arrangements:
 
                                 
    Three Months Ended
    Nine Months Ended
 
    September 30, 2009     September 30, 2009  
    Gain (Loss)
          Gain (Loss)
       
    Recognized in Other
    Gain (Loss)
    Recognized in Other
    Gain (Loss)
 
    Comprehensive
    Recognized in
    Comprehensive
    Recognized in
 
    Income     Income     Income     Income  
    (In $ millions)  
Derivatives designated as cash flow
hedging instruments
                               
Interest rate swaps
    (20)  (2)      (17)  (1)      (33)  (2)      (44)  (1) 
Derivatives designated as net investment hedging instruments
                               
Euro-denominated term loan
                       
Derivatives not designated as
hedging instruments
                               
Foreign currency forwards and swaps
          (7)              (22)   
                                 
Total
    (20)        (24)        (33)        (66)   
                                 
 
(1) Amount represents reclassification from Accumulated other comprehensive income (loss), net, and is classified as Interest expense in the unaudited interim consolidated statements of operations.
(2) Amount excludes tax effect of $4 million recognized in Other comprehensive income (loss).
 
See Note 14 for additional information regarding the fair value of the Company’s derivative arrangements.
 
14.  Fair Value Measurements
 
On January 1, 2009, the Company adopted the provisions of FASB ASC 820, Fair Value Measurements and Disclosures (“FASB ASC 820”) for nonrecurring fair value measurements of non-financial assets and liabilities, such as goodwill, indefinite-lived intangible assets, property, plant and equipment and asset retirement obligations. The adoption did not have a material impact on the Company’s financial position, results of operations or cash flows.
 
FASB ASC 820 establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows:
 
  Level 1 — unadjusted quoted prices for identical assets or liabilities in active markets accessible by the Company
 
Level 2 — inputs that are observable in the marketplace other than those inputs classified as Level 1
 
Level 3 — inputs that are unobservable in the marketplace and significant to the valuation


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FASB ASC 820 requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs. If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation.
 
The Company’s financial assets and liabilities are measured at fair value on a recurring basis and include securities available for sale and derivative financial instruments. Securities available for sale include US government and corporate bonds, mortgage-backed securities and equity securities. Derivative financial instruments include interest rate swaps and foreign currency forwards and swaps.
 
Marketable Securities. Where possible, the Company utilizes quoted prices in active markets to measure debt and equity securities; such items are classified as Level 1 in the hierarchy and include equity securities and US government bonds. When quoted market prices for identical assets are unavailable, varying valuation techniques are used. Common inputs in valuing these assets include, among others, benchmark yields, issuer spreads, forward mortgage-backed securities trade prices and recently reported trades. Such assets are classified as Level 2 in the hierarchy and typically include mortgage-backed securities, corporate bonds and other US government securities.
 
Derivatives. Derivative financial instruments are valued in the market using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 inputs such as interest rates and foreign currency exchange rates. These market inputs are utilized in the discounted cash flow calculation considering the instrument’s term, notional amount, discount rate and credit risk. Significant inputs to the derivative valuation for interest rate swaps and foreign currency forwards and swaps are observable in the active markets and are classified as Level 2 in the hierarchy.


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The following fair value hierarchy table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis:
 
                         
    Fair Value Measurement Using        
    Quoted Prices in
             
    Active Markets for
    Significant Other
       
    Identical Assets
    Observable Inputs
       
    (Level 1)     (Level 2)     Total  
    (In $ millions)  
Marketable securities, at fair value
                       
US government debt securities
          33        33   
US corporate debt securities
                 
                         
Total debt securities
          34        34   
Equity securities
    50              50   
Money market deposits and other securities
                 
Derivatives not designated as hedging instruments
                       
Foreign currency forwards and swaps
          13        13  (1)
                         
Total assets as of September 30, 2009
    50        50        100   
                         
                         
Derivatives designated as cash flow hedging instruments
                       
Interest rate swaps
          (67)        (67)  (2)
Interest rate swaps
          (55)        (55)  (3)
Derivatives not designated as hedging instruments
                       
Foreign currency forwards and swaps
          (9)        (9)  (2)
                         
Total liabilities as of September 30, 2009
          (131)        (131)   
                         
                         
Marketable securities, at fair value
                       
US government debt securities
          52        52   
US corporate debt securities
                 
                         
Total debt securities
          55        55   
Equity securities
    42              42   
Money market deposits and other securities
                 
Derivatives not designated as hedging instruments
                       
Foreign currency forwards and swaps
          54        54  (1)
                         
Total assets as of December 31, 2008
    42        112        154   
                         
                         
Derivatives designated as cash flow hedging instruments
                       
Interest rate swaps
          (42)        (42)  (2)
Interest rate swaps
          (76)        (76)  (3)
Derivatives not designated as hedging instruments
                       
Foreign currency forwards and swaps
          (25)        (25)  (2)
                         
Total liabilities as of December 31, 2008
          (143)        (143)   
                         
 
 
(1) Included in current Other assets in the unaudited consolidated balance sheets.
 
(2) Included in current Other liabilities in the unaudited consolidated balance sheets.
 
(3) Included in noncurrent Other liabilities in the unaudited consolidated balance sheets.
 
Certain assets and liabilities are measured at fair value on a nonrecurring basis and therefore, are not included in the table above. These include assets measured at cost that have to be tested for impairment on an annual basis by comparing fair value to carrying value.


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The Company performed its annual goodwill impairment test during the three months ended September 30, 2009 using June 30 balances. Recoverability of goodwill was determined based on Level 3 inputs using a combination of both a discounted cash flow model incorporating discount rates commensurate with the risks involved for each reporting unit and the market approach which utilized comparable company data. In connection with this annual impairment test, the Company did not record an impairment loss related to goodwill (see Note 6).
 
The Company performed its annual impairment test of indefinite-lived intangible assets during the three months ended September 30, 2009 using June 30 balances. In connection with this annual impairment test, the Company recorded an impairment loss of less than $1 million to indefinite-lived intangible assets. The measurement of fair value was determined based on Level 3 inputs using a relief from royalty method to determine the estimated fair value for each indefinite-lived intangible asset (see Note 6).
 
The Company determined certain long-lived assets associated with its Pardies, France facility were impaired during the three months ended September 30, 2009 determined based on Level 3 inputs using a discounted cash flow model (see Note 3 and Note 15).
 
Summarized below are the carrying values and estimated fair values of financial instruments that are not carried at fair value on our consolidated balance sheets:
 
                                 
    As of September 30,
    As of December 31,
 
    2009     2008  
    Carrying
    Fair
    Carrying
    Fair
 
    Amount     Value     Amount     Value  
    (In $ millions)  
 
Cost investments
    184       -       184       -  
Insurance contracts in nonqualified pension trusts
    67       67       67       67  
Long-term debt, including current installments of long-term debt
    3,390       3,224       3,381       2,404  
 
In general, the cost investments included in the table above are not publicly traded and their fair values are not readily determinable; however, the Company believes the carrying values approximate or are less than the fair values.
 
As of September 30, 2009 and December 31, 2008, the fair values of cash and cash equivalents, receivables, trade payables, short-term debt 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. Additionally, certain noncurrent receivables, principally insurance recoverables, are carried at net realizable value.
 
The fair value of long-term debt is based on valuations from third-party banks and market quotations.
 
15.  Other (Charges) Gains, Net
 
The components of Other (charges) gains, net, are as follows:
 
                                 
    Three Months Ended
    Nine Months Ended
 
    September 30,     September 30,  
    2009     2008     2009     2008  
    (In $ millions)  
 
Employee termination benefits
    (65)        (8)        (94)        (19)   
Plant/office closures
    (20)              (20)        (7)   
Ticona Kelsterbach plant relocation (see Note 19)
    (4)        (3)        (10)        (8)   
Plumbing actions
                       
Insurance recoveries associated with Clear Lake, Texas
          23              23   
Sorbates antitrust actions (see Note 12)
                       
Asset impairments
    (7)        (21)        (8)        (21)   
                                 
Total
    (96)        (1)        (123)        (24)   
                                 


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During the first quarter of 2009, the Company began efforts to align production capacity and staffing levels with the Company’s view of an economic environment of prolonged lower demand. For the nine months ended September 30, 2009, Other charges included employee termination benefits of $33 million related to this endeavor. As a result of the shutdown of the vinyl acetate monomer (“VAM”) production unit in Cangrejera, Mexico, the Company recognized employee termination benefits of $1 million and long-lived asset impairment losses of $1 million during the nine months ended September 30, 2009. The VAM production unit in Cangrejera, Mexico is included in the Company’s Acetyl Intermediates segment.
 
As a result of the Project of Closure (see Note 3), Other charges for the Company included exit costs of $85 million during the three months ended September 30, 2009, which consisted of $58 million in employee termination benefits, $20 million of contract termination costs and $7 million of long-lived asset impairment losses. The Pardies, France facility is included in the Acetyl Intermediates segment.
 
Due to continued declines in demand in automotive and electronic sectors, the Company announced plans to reduce capacity by ceasing polyester polymer production at its Ticona manufacturing plant in Shelby, North Carolina. Other charges for the three months ended September 30, 2009 included $2 million of employee termination benefits related to this event. The Shelby, North Carolina facility is included in the Advanced Engineered Materials segment.
 
Other charges for the nine months ended September 30, 2009 was partially offset by $6 million of insurance recoveries in satisfaction of claims the Company made related to the unplanned outage of the Company’s Clear Lake, Texas acetic acid facility during 2007, a $2 million decrease in legal reserves for plumbing claims for which the statute of limitations has expired and $1 million of insurance recoveries associated with plumbing cases.
 
Other charges during the three and nine months ended September 30, 2008 primarily included $21 million of long-lived asset impairment losses on the Company’s Pampa, Texas facility, a $23 million recovery of insurance claims associated with the unplanned outage of the Company’s Clear Lake, Texas facility during 2007, and the release of reserves related to the $8 million, net settlement of the Sorbates antitrust actions. Employee termination benefits during 2008 primarily related to the Company’s strategy to simplify and optimize its business portfolio.
 
The changes in the restructuring reserves by business segment are as follows:
 
                                                             
    Advanced
                                           
    Engineered
      Consumer
      Industrial
      Acetyl
                   
    Materials       Specialties       Specialties       Intermediates       Other       Total    
    (In $ millions)    
 
Employee Termination Benefits
                                                           
Reserve as of December 31, 2008
    2         2         6         17         2         29    
Restructuring additions
    12         6         5         64         7         94    
Cash payments
    (6 )       (4 )       (7 )       (21 )       (5 )       (43 )  
Exchange rate changes
    1         -         -         1         -         2    
                                                 
Reserve as of September 30, 2009
    9         4         4         61         4         82    
                                                 
                                                             
Plant/Office Closures
                                                           
Reserve as of December 31, 2008
    -         2         -         -         1         3    
Restructuring additions
    -         -         -         20         -         20    
Transfer to demolition accrual (current Other liabilities)
    -         (2 )       -         -         -         (2 )  
Cash payments
    -         -         -         -         (1 )       (1 )  
                                                 
Reserve as of September 30, 2009
    -         -         -         20         -         20    
                                                 
Total
    9         4         4         81         4         102    
                                                 


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16.  Income Taxes
 
The Company’s effective income tax rate for the three months ended September 30, 2009 was (714)% compared to (8)% for the three months ended September 30, 2008. The Company’s effective income tax rate for the nine months ended September 30, 2009 was (212)% compared to 17% for the nine months ended September 30, 2008. The decrease in the effective income tax rate was primarily due to a decrease in the valuation allowance on US net deferred tax assets, partially offset by lower earnings in jurisdictions participating in tax holidays, additions to reserves for uncertain tax positions and related interest and an increase in valuation allowances on certain foreign net deferred tax assets.
 
Since 2004, the Company has maintained a valuation allowance against its US net deferred tax assets. FASB ASC 740, Income Taxes, requires the Company to continually assess all available positive and negative evidence to determine whether it is more likely than not that the net deferred tax assets will be realized. In the third quarter of 2009, the Company concluded that, except for certain state net operating and capital loss carryforwards, it is more likely than not that it will realize its net US deferred tax assets. Accordingly, during the three months ended September 30, 2009, the Company recorded a discrete deferred tax benefit of $382 million for the release of the beginning-of-the-year US valuation allowance associated with those US net deferred tax assets expected to be realized in years subsequent to 2009.
 
Absent the $382 million discrete release of the US valuation allowance, the Company’s effective tax rate for the three months ended September 30, 2009 would have been 65% compared to (8)% for the three months ended September 30, 2008, and the Company’s effective income tax rate for the nine months ended September 30, 2009 would have been 35% compared to 17% for the nine months ended September 30, 2008. The increase in the effective income tax rate was primarily due to lower earnings in jurisdictions participating in tax holidays, additions to reserves for uncertain tax positions and related interest and increases in valuation allowances on certain foreign net deferred tax assets.
 
Liabilities for unrecognized tax benefits and related interest and penalties are recorded in Uncertain tax positions and current Other liabilities in the unaudited consolidated balance sheets. For the nine months ended September 30, 2009, the total unrecognized tax benefits, interest and penalties increased by $13 million, of which $11 million related to currency translation adjustments. The Company expects to resolve certain tax matters within the next twelve months due to the conclusion of tax examinations, which could result in a reduction of the Company’s unrecognized tax benefits of $6 million.
 
Equity in net earnings (loss) of affiliates included $19 million in earnings related to a one-time reversal of deferred tax liabilities recorded by the Company’s Polyplastics Co., Ltd equity-method investee due to a foreign tax law enactment. The Company’s Polyplastics Co., Ltd equity-method investment is included in the Advanced Engineered Materials segment.


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17.  Business Segments
 
                                                         
    Advanced
                                     
     Engineered 
    Consumer
    Industrial
    Acetyl
    Other
             
    Materials      Specialties       Specialties       Intermediates       Activities       Eliminations       Consolidated   
    (In $ millions)  
 
Three months ended
September 30, 2009
                                                       
Net sales
    220       271       236       666 (1)     -       (89 )     1,304  
Other (charges) gains, net
    (6 )     (3 )     (2 )     (85 )     -       -       (96 )
Equity in net earnings
(loss) of affiliates
    11       -       -       2       6       -       19  
Earnings (loss) from
continuing operations
before tax
    32       52       44       (9 )     (70 )     -       49  
Depreciation and
amortization
    17       13       14       34       5       -       83  
Capital expenditures
    5       12       7       7       3       -       34 (3)
                                                         
Three months ended September 30, 2008
                                                       
Net sales
    272       295       378       1,056 (1)     -       (178 )     1,823  
Other (charges) gains, net
    (3 )     -       -       (5 )     7       -       (1 )
Equity in net earnings
(loss) of affiliates
    12       1       -       1       5       -       19  
Earnings (loss) from
continuing operations
before tax
    25       43       18       133       (67 )     -       152  
Depreciation and
amortization
    19       13       15       36       2       -       85  
Capital expenditures
    16       15       18       21       3       -       73 (4)
 


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    Advanced
                                                 
     Engineered 
    Consumer
    Industrial
    Acetyl
    Other
                         
    Materials      Specialties       Specialties       Intermediates       Activities       Eliminations       Consolidated               
    (In $ millions)              
 
Nine months ended
September 30, 2009
                                                                       
Net sales
    569       817       745       1,860 (2)     1       (298 )     3,694                  
Other (charges) gains, net
    (19 )     (6 )     (5 )     (86 )     (7 )     -       (123 )                
Equity in net earnings
(loss) of affiliates
    26       1       -       5       12       -       44                  
Earnings (loss) from
continuing operations
before tax
    28       240       73       51       (237 )     -       155                  
Depreciation and
amortization
    53       37       41       93       9       -       233                  
Capital expenditures
    15       30       33       23       4       -       105 (3)                
Goodwill and intangible
assets
    394       305       64       358       -       -       1,121                  
Total assets
    2,131       1,073       770       1,973       2,303       -       8,250                  
                                                                         
Nine months ended
September 30, 2008
                                                                       
Net sales
    866       869       1,129       3,219 (2)     1       (547 )     5,537                  
Other (charges) gains, net
    (9 )     (1 )     (4 )     (14 )     4       -       (24 )                
Equity in net earnings
(loss) of affiliates
    32       1       -       3       10       -       46                  
Earnings (loss) from
continuing operations
before tax
    112       187       55       520       (257 )     -       617                  
Depreciation and
amortization
    58       40       43       102       7       -       250                  
Capital expenditures
    43       35       47       62       7       -       194 (4)                
Goodwill and intangible
assets as of
December 31, 2008
    398       309       73       363       -       -       1,143                  
Total assets as of
December 31, 2008
    1,867       995       903       2,197       1,204       -       7,166                  
 
 
(1) Includes $89 million and $178 million of inter-segment sales eliminated in consolidation for the three months ended September 30, 2009 and 2008, respectively.
(2) Includes $298 million and $547 million of inter-segment sales eliminated in consolidation for the nine months ended September 30, 2009 and 2008, respectively.
(3) Includes decrease of $0 and $25 million in accrued capital expenditures for the three and nine months ended September 30, 2009, respectively.
(4) Includes decrease of $3 million and $18 million in accrued capital expenditures for the three and nine months ended September 30, 2008, respectively.

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18.  Earnings Per Share
 
                                         
    Three Months Ended September 30,    
    2009       2008    
    Basic       Diluted       Basic       Diluted    
    (In $ millions, except for share and per share data)    
 
Amounts attributable to Celanese Corporation
                                       
Earnings (loss) from continuing operations
    399         399         164         164    
Earnings (loss) from discontinued operations
    -         -         (6 )       (6 )  
                                 
Net earnings (loss)
    399         399         158         158    
Less: Cumulative preferred stock dividends
    (3 )       -         (3 )       -    
                                 
                                         
Net earnings (loss) available to common shareholders
    396         399         155         158    
                                 
                                         
Weighted-average shares — basic
    143,591,231         143,591,231         147,063,241         147,063,241    
Dilutive stock options
              1,730,977                   3,367,888    
Dilutive restricted stock units
              150,672                   418,300    
Assumed conversion of preferred stock
              12,090,036                   12,062,260    
                                 
Weighted-average shares — diluted
              157,562,916                   162,911,689    
                                 
Per share
                                       
Earnings (loss) from continuing operations
    2.76         2.53         1.09         1.01    
Earnings (loss) from discontinued operations
    -         -         (0.04 )       (0.04 )  
                                 
Net earnings (loss)
    2.76         2.53         1.05         0.97    
                                 
 
                                         
    Nine Months Ended September 30,    
    2009       2008    
    Basic       Diluted       Basic       Diluted    
    (In $ millions, except for share and per share data)    
 
Amounts attributable to Celanese Corporation
                                       
Earnings (loss) from continuing operations
    483         483         512         512    
Earnings (loss) from discontinued operations
    -         -         (75 )       (75 )  
                                 
Net earnings (loss)
    483         483         437         437    
Less: Cumulative preferred stock dividends
    (8 )       -         (8 )       -    
                                 
                                         
Net earnings (loss) available to common shareholders
    475         483         429         437    
                                 
                                         
Weighted-average shares — basic
    143,542,405         143,542,405         149,976,915         149,976,915    
Dilutive stock options
              917,156                   3,412,357    
Dilutive restricted stock units
              128,668                   556,478    
Assumed conversion of preferred stock
              12,090,036                   12,062,260    
                                 
Weighted-average shares — diluted
              156,678,265                   166,008,010    
                                 
                                         
Per share
                                       
Earnings (loss) from continuing operations
    3.31         3.08         3.36         3.08    
Earnings (loss) from discontinued operations
    -         -         (0.50 )       (0.45 )  
                                 
Net earnings (loss)
    3.31         3.08         2.86         2.63    
                                 


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The following securities were not included in the computation of diluted earnings per share as their effect would have been antidilutive:
 
                                 
    Three Months
    Nine Months
 
    Ended September 30,     Ended September 30,  
    2009     2008     2009     2008  
 
Stock options
    604,500        773,750        3,043,187        711,875   
Restricted stock units
    419,621        66,250        378,625        22,083   
                                 
Total
    1,024,121        840,000        3,421,812        733,958   
                                 
 
19. Ticona Kelsterbach Plant Relocation
 
In 2007, the Company finalized a settlement agreement with the Frankfurt, Germany, Airport (“Fraport”) to relocate the Kelsterbach, Germany Ticona business, included in the Advanced Engineered Materials segment, resolving several years of legal disputes related to the planned Fraport expansion. As a result of the settlement, the Company will transition Ticona’s operations from Kelsterbach to the Hoechst Industrial Park in the Rhine Main area in Germany by mid-2011. Under the original agreement, Fraport agreed to pay Ticona a total of €670 million over a five-year period to offset the costs associated with the transition of the business from its current location and the closure of the Kelsterbach plant. In February 2009, the Company announced the Fraport supervisory board approved the acceleration of the 2009 and 2010 payments of €200 million and €140 million, respectively, required by the settlement agreement signed in June 2007. In February 2009, the Company received a discounted amount of €322 million ($412 million) under this agreement. Amounts received from Fraport are accounted for as deferred proceeds and are included in noncurrent Other liabilities in the unaudited consolidated balance sheets. In addition, the Company received €59 million ($75 million) in value-added tax from Fraport which was remitted to the tax authorities in April 2009.
 
Below is a summary of the financial statement impact associated with the Ticona Kelsterbach plant relocation:
 
                         
    Nine Months Ended
    Total From
 
    September 30,     Inception Through
 
    2009     2008     September 30, 2009  
    (in $ millions)  
 
Proceeds received from Fraport
    412        311        749   
Costs expensed
    10              27   
Costs capitalized
    270  (1)     130  (1)     513   
 
 
(1) Includes an increase in accrued capital expenditures of $22 million and $8 million for the nine months ended September 30, 2009 and 2008, respectively.
 
20.  Subsequent Events
 
On October 5, 2009, the Company declared a cash dividend of $0.265625 per share on its 4.25% convertible perpetual preferred stock amounting to approximately $2 million and a cash dividend of $0.04 per share on its Series A common stock amounting to approximately $6 million. Both cash dividends are for the period August 3, 2009 to November 1, 2009 and will be paid on November 2, 2009 to holders of record as of October 15, 2009.
 
Subsequent events have been evaluated through the date of issuance, October 27, 2009.


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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
In this Quarterly Report on Form 10-Q, the term “Celanese” refers to Celanese Corporation, a Delaware corporation, and not its subsidiaries. The terms the “Company”, “we,” “our” and “us”, refer to Celanese and its subsidiaries on a consolidated basis. The term “Celanese US” refers to our subsidiary, Celanese US Holdings LLC, a Delaware limited liability company, formally known as BCP Crystal US Holdings Corp., a Delaware corporation, and not its subsidiaries. The term “Purchaser” refers to our subsidiary, Celanese Europe Holding GmbH & Co. KG, formerly known as BCP Crystal Acquisition GmbH & Co. KG, a German limited partnership, and not its subsidiaries, except where otherwise indicated.
 
Forward-Looking Statements May Prove Inaccurate
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and other parts of this Quarterly Report on Form 10-Q contain certain forward-looking statements and information relating to us that are based on the beliefs of our management as well as assumptions made by, and information currently available to, us. When used in this document, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and “project” and similar expressions, as they relate to us are intended to identify forward-looking statements. These statements reflect our current views with respect to future events, are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Further, certain forward-looking statements are based upon assumptions as to future events that may not prove to be accurate.
 
The following discussion should be read in conjunction with the Celanese Corporation and Subsidiaries consolidated financial statements as of and for the year ended December 31, 2008, as filed on February 13, 2009 with the Securities and Exchange Commission (“SEC”) as part of the Company’s Annual Report on Form 10-K (the “2008 Form 10-K”) and the unaudited interim consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.
 
See the Risk Factors section under Part II, Item 1A of this Quarterly Report on Form 10-Q for a description of risk factors that could significantly affect our financial results. In addition, the following factors could cause our actual results to differ materially from those results, performance or achievements that may be expressed or implied by such forward-looking statements. These factors include, among other things:
 
  •   changes in general economic, business, political and regulatory conditions in the countries or regions in which we operate;
 
  •   the length and depth of product and industry business cycles particularly in the automotive, electrical, electronics and construction industries;
 
  •   changes in the price and availability of raw materials, particularly changes in the demand for, supply of, and market prices of ethylene, methanol, natural gas, wood pulp, fuel oil and electricity;
 
  •   the ability to pass increases in raw material prices on to customers or otherwise improve margins through price increases;
 
  •   the ability to maintain plant utilization rates and to implement planned capacity additions and expansions;
 
  •   the ability to reduce production costs and improve productivity by implementing technological improvements to existing plants;
 
  •   increased price competition and the introduction of competing products by other companies;
 
  •   changes in the degree of intellectual property and other legal protection afforded to our products;
 
  •   compliance costs and potential disruption or interruption of production due to accidents or other unforeseen events or delays in construction of facilities;
 
  •   potential liability for remedial actions under existing or future environmental regulations;


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  •   potential liability resulting from pending or future litigation, or from changes in the laws, regulations or policies of governments or other governmental activities in the countries in which we operate;
 
  •   changes in currency exchange rates and interest rates; and
 
  •   various other factors, both referenced and not referenced in this Quarterly Report on Form 10-Q.
 
Many of these factors are macroeconomic in nature and are, therefore, beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from those described in this Quarterly Report as anticipated, believed, estimated, expected, intended, planned or projected. We neither intend nor assume any obligation to update these forward-looking statements, which speak only as of their dates.
 
Overview
 
We are a leading global integrated producer of chemicals and advanced materials. We are one of the world’s largest producers of acetyl products, which are intermediate chemicals for nearly all major industries, as well as a leading global producer of high-performance engineered polymers that are used in a variety of high-value end-use applications. As an industry leader, we hold geographically balanced global positions and participate in diversified end-use markets. Our operations are primarily located in North America, Europe and Asia. We combine a demonstrated track record of execution, strong performance built on shared principles and objectives, and a clear focus on growth and value creation.
 
2009 Significant Events:
 
  •   We announced the Frankfurt, Germany Airport (“Fraport”) supervisory board approved the acceleration of the 2009 and 2010 payments of €200 million and €140 million, respectively, required by the settlement agreement signed in June 2007. On February 5, 2009, we received a discounted amount of approximately €322 million ($412 million), excluding value-added tax of €59 million ($75 million).
 
  •   We shut down our vinyl acetate monomer (“VAM”) production unit in Cangrejera, Mexico, and ceased VAM production at the site during the first quarter of 2009.
 
  •   Standard and Poor’s affirmed our ratings and revised our outlook from positive to stable in February 2009.
 
  •   We received the American Chemistry Council’s (“ACC”) Responsible Care® Sustained Excellence Award for mid-size companies. The annual award, the most prestigious award given under ACC’s Responsible Care® initiative, recognizes companies for outstanding leadership under ACC’s Environmental Health and Safety performance criteria.
 
  •   We completed the sale of our polyvinyl alcohol (“PVOH”) business to Sekisui Chemical Co., Ltd. for the net cash purchase price of $168 million, excluding the value of accounts receivable and payable retained by Celanese.
 
  •   We agreed to a “Project of Closure” for our acetic acid and vinyl acetate monomer production operations at our Pardies, France facility. These operations are expected to cease by December 2009. As a result of the Pardies, France Project of Closure, we have incurred $97 million of exit costs in 2009. We may incur up to an additional $17 million in contingent employee termination benefits related to the Pardies, France Project of Closure.
 
  •   We announced that Celanese US has amended its $650 million revolving credit facility. The amendment lowered the total revolver commitment to $600 million and increased the first lien senior secured leverage ratio for a period of six quarters, beginning June 30, 2009 and ending December 31, 2010.
 
  •   We announced the creation of our new and proprietary AOPlus®2 acetic acid technology, which allows for expansion up to 1.5 million tons per reactor.
 
  •   We successfully started up the previously announced expansion of our acetic acid unit in Nanjing, China. Production is expected to ramp up during the fourth quarter of 2009. Once the expansion is complete, the unit’s capacity will double from 600,000 tons to 1.2 million tons annually.
 
  •   We announced the expansion of our vinyl acetate/ethylene (“VAE”) manufacturing facility at our Nanjing, China, integrated chemical complex to support continued growth plans throughout Asia. The expanded facility will double our VAE capacity in the region and is expected to be operational in the first half of 2011.


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Results of Operations
 
Financial Highlights
 
                                                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
          % of
          % of
          % of
          % of
 
    2009     Net Sales     2008     Net Sales     2009     Net Sales     2008     Net Sales  
    (unaudited)
 
    (In $ millions, except for percentages)  
 
Net sales
    1,304       100.0       1,823       100.0       3,694       100.0       5,537       100.0  
Gross profit
    266       20.4       333       18.3       714       19.3       1,147       20.7  
Selling, general and administrative expenses
    (110 )     (8.4 )     (142 )     (7.8 )     (338 )     (9.1 )     (416 )     (7.5 )
Other (charges) gains, net
    (96 )     (7.4 )     (1 )     (0.1 )     (123 )     (3.3 )     (24 )     (0.4 )
Operating profit
    65       5.0       151       8.3       181       4.9       592       10.7  
Equity in net earnings (loss) of affiliates
    19       1.5       19       1.0       44       1.2       46       0.8  
Interest expense
    (51 )     (3.9 )     (65 )     (3.6 )     (156 )     (4.2 )     (195 )     (3.5 )
Dividend income — cost investments
    19       1.5       35       1.9       81       2.2       138       2.5  
Earnings (loss) from continuing operations before tax
    49       3.8       152       8.3       155       4.2       617       11.1  
Amounts attributable to Celanese Corporation
                                                               
Earnings (loss) from continuing operations
    399       30.6       164       9.0       483       13.1       512       9.3  
Earnings (loss) from discontinued operations
    -       -       (6 )     (0.3 )     -       -       (75 )     (1.4 )
Net earnings (loss)
    399       30.6       158       8.7       483       13.1       437       7.9  
Depreciation and amortization
    83       6.4       85       4.7       233       6.3       250       4.5  
 
                 
    As of
    As of
 
    September 30,
    December 31,
 
    2009     2008  
    (unaudited)
 
    (in $ millions)  
 
Short-term borrowings and current installments of long-term debt — third party and affiliates
    265        233   
Long-term debt
    3,312        3,300   
                 
Total debt
                   3,577                       3,533   
                 
 
Summary of Consolidated Results for the Three and Nine Months Ended September 30, 2009 compared to the Three and Nine Months Ended September 30, 2008
 
The economic slowdown that severely impacted the global economy late in 2008 continued to impact net sales and profitability through the third quarter of 2009. Net sales decreased 28% and 33% during the three and nine months ended September 30, 2009, respectively, compared to the same periods in 2008, primarily due to lower volumes and unfavorable foreign currency impacts across all segments and lower prices for acetyl intermediates products. Decreased demand for automotive and industrial products drove the decline in volumes. Volume declines occurred primarily in Europe and the Americas. Demand slightly increased in Asia for most of our major acetyl intermediates products. Selling prices during the period were negatively impacted by lower industry utilization of acetyl intermediates products, particularly in Europe and the Americas, coupled with lower raw material prices. Selling price increases for acetate tow, ultra-high molecular weight polyethylene (“GUR®”) and Vectra® liquid crystal polymer (“LCP”) partially offset the overall decline in net sales.
 
Gross profit declined due to lower net sales. As a percentage of sales, gross profit increased as a result of decreased raw material and energy costs, and depreciation and amortization across all businesses. Depreciation and amortization declines resulted partially from the shutdown of our Pampa, Texas facility and the effects of long-lived asset impairment losses recognized during the fourth quarter of 2008 on depreciation.
 
Selling, general and administrative expenses decreased $32 million and $78 million for the three and nine months ended September 30, 2009, respectively, compared to the same periods in 2008. Selling, general and administrative


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expenses declined due to our fixed spending reduction efforts, restructuring efficiencies, decreased costs resulting from the shutdown of our Pampa, Texas facility and favorable currency impacts on overall spending.
 
The components of Other (charges) gains, net, are as follows:
 
                                 
    Three Months Ended
    Nine Months Ended
 
    September 30,     September 30,  
    2009     2008     2009     2008  
    (unaudited)  
    (In $ millions)  
 
Employee termination benefits
    (65)        (8)        (94)        (19)   
Plant/office closures
    (20)              (20)        (7)   
Ticona Kelsterbach plant relocation
    (4)        (3)        (10)        (8)   
Plumbing actions
                       
Insurance recoveries associated with Clear Lake, Texas
          23              23   
Sorbates antitrust actions
                       
Asset impairments
    (7)        (21)        (8)        (21)   
                                 
Total
    (96)        (1)        (123)        (24)   
                                 
 
During the first quarter of 2009, we began efforts to align production capacity and staffing levels with our view of an economic environment of prolonged lower demand. For the nine months ended September 30, 2009, Other charges included employee termination benefits of $33 million related to this endeavor. As a result of the shutdown of the vinyl acetate monomer production unit in Cangrejera, Mexico, we recognized employee termination benefits of $1 million and long-lived asset impairment losses of $1 million during the nine months ended September 30, 2009. The VAM production unit in Cangrejera, Mexico is included in our Acetyl Intermediates segment.
 
As a result of the Project of Closure, Other charges included exit costs of $85 million during the three months ended September 30, 2009, which consisted of $58 million in employee termination benefits, $20 million of contract termination costs and $7 million of long-lived asset impairment losses. The Pardies, France facility is included in the Acetyl Intermediates segment.
 
Due to continued declines in demand in automotive and electronic sectors, we announced our plans to reduce capacity by ceasing polyester polymer production at our Ticona manufacturing plant in Shelby, North Carolina. Other charges for the three months ended September 30, 2009 included $2 million of employee termination benefits related to this event. The Shelby, North Carolina facility is included in the Advanced Engineered Materials segment.
 
Other charges for the nine months ended September 30, 2009 was partially offset by $6 million of insurance recoveries in satisfaction of claims we made related to the unplanned outage of our Clear Lake, Texas acetic acid facility during 2007, a $2 million decrease in legal reserves for plumbing claims for which the statute of limitations has expired and $1 million of insurance recoveries associated with plumbing cases.
 
Other charges during the three and nine months ended September 30, 2008 primarily included $21 million of long-lived asset impairment losses on our Pampa, Texas facility, a $23 million recovery of insurance claims associated with the unplanned outage of our Clear Lake, Texas facility during 2007, and the release of reserves related to the $8 million, net settlement of the Sorbates antitrust actions. Employee termination benefits costs incurred during 2008 related to our continued strategy to simplify and optimize our business portfolio.
 
Operating profit decreased $86 million and $411 million for the three and nine months ended September 30, 2009, respectively, compared to the same periods in 2008. Lower raw material and energy costs and decreased overall spending only partially offset the decline in net sales. Decreased overall spending was the result of our fixed spending reduction efforts.
 
Our effective income tax rate for the three months ended September 30, 2009 was (714)% compared to (8)% for the three months ended September 30, 2008. Our effective income tax rate for the nine months ended September 30, 2009 was (212)% compared to 17% for the nine months ended September 30, 2008. The decrease in the effective income tax rate was primarily due to a decrease in the valuation allowance on US net deferred tax assets, partially


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offset by lower earnings in jurisdictions participating in tax holidays, additions to reserves for uncertain tax positions and related interest and an increase in valuation allowances on certain foreign net deferred tax assets.
 
Since 2004, we have maintained a valuation allowance against our US net deferred tax assets. FASB Accounting Standards Codification (“FASB ASC”) 740, Income Taxes, requires that we continually assess both positive and negative evidence to determine whether it is more likely than not that the deferred tax assets can be realized prior to their expiration. During the three months ended September 30, 2009, considering all available information, we concluded that, based primarily on cumulative US earnings, it is more likely than not that we will realize the majority of our net deferred tax assets in the US and recorded a discrete deferred tax benefit of $382 million for the release of valuation allowance.
 
Absent the $382 million discrete release of the US valuation allowance in the quarter ending September 30, 2009, our effective tax rate for the three months ended September 30, 2009 would have been 65% compared to (8)% for the three months ended September 30, 2008. Our effective income tax rate for the nine months ended September 30, 2009 would have been 35% compared to 17% for the nine months ended September 30, 2008. The increase in the effective income tax rate would be primarily due to lower earnings in jurisdictions participating in tax holidays, additions to reserves for uncertain tax positions and related interest and increases in valuation allowances on certain foreign net deferred tax assets.
 
Liabilities for unrecognized tax benefits and related interest and penalties are recorded in Uncertain tax positions and current Other liabilities in the accompanying unaudited consolidated balance sheets. For the nine months ended September 30, 2009, the total unrecognized tax benefits, interest and penalties increased by $13 million, of which $11 million related to currency translation adjustments. We expect to resolve certain tax matters within the next twelve months due to the conclusion of tax examinations, which could result in a deduction of our unrecognized tax benefits of $6 million.
 
Equity in net earnings (loss) of affiliates included $19 million in earnings related to a one-time reversal of deferred tax liabilities recorded by our Polyplastics Co., Ltd equity-method investee due to a foreign tax law enactment. Our Polyplastics Co., Ltd equity-method investment is included in the Advanced Engineered Materials segment.
 
Earnings (loss) from discontinued operations for the nine months ended September 30, 2008 primarily related to a legal settlement agreement we entered into in June 2008. Under the settlement agreement, we agreed to pay $107 million to resolve certain legacy items. Because the legal proceeding related to sales by the polyester staple fibers business which Hoechst AG sold to KoSa, Inc. in 1998, the impact of the settlement is reflected within discontinued operations in the current period. See the “Polyester Staple Antitrust Litigation” in Note 12 of the accompanying unaudited interim consolidated financial statements. Earnings (loss) from discontinued operations during the three months ended September 30, 2008 consisted of legal reserves for current legal cases related to discontinued operations.


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Selected Data by Business Segment
 
                                                             
    Three Months Ended
    Nine Months Ended
 
    September 30,     September 30,  
                Change
                Change
 
    2009     2008     in $     2009     2008     in $  
    (unaudited)
 
    (in $ millions)  
 
Net sales
                                                           
Advanced Engineered Materials
    220         272         (52 )       569         866         (297 )  
Consumer Specialties
    271         295         (24 )       817         869         (52 )  
Industrial Specialties
    236         378         (142 )       745         1,129         (384 )  
Acetyl Intermediates
    666         1,056         (390 )       1,860         3,219         (1,359 )  
Other Activities
    -         -         -         1         1         -    
Inter-segment eliminations
    (89 )       (178 )       89         (298 )       (547 )       249    
                                                             
Total
    1,304         1,823         (519 )       3,694         5,537         (1,843 )  
                                                             
Other (charges) gains, net
                                                           
Advanced Engineered Materials
    (6 )       (3 )       (3 )       (19 )       (9 )       (10 )  
Consumer Specialties
    (3 )       -         (3 )       (6 )       (1 )       (5 )  
Industrial Specialties
    (2 )       -         (2 )       (5 )       (4 )       (1 )  
Acetyl Intermediates
    (85 )       (5 )       (80 )       (86 )       (14 )       (72 )  
Other Activities
    -         7         (7 )       (7 )       4         (11 )  
                                                             
Total
    (96 )       (1 )       (95 )       (123 )       (24 )       (99 )  
                                                             
Operating profit (loss)
                                                           
Advanced Engineered Materials
    21         13         8         2         80         (78 )  
Consumer Specialties
    52         42         10         184         138         46    
Industrial Specialties
    44         18         26         73         55         18    
Acetyl Intermediates
    (30 )       100         (130 )       22         425         (403 )  
Other Activities
    (22 )       (22 )       -         (100 )       (106 )       6    
                                                             
Total
    65         151         (86 )       181         592         (411 )  
                                                             
Earnings (loss) from continuing operations before tax
                                                           
Advanced Engineered Materials
    32         25         7         28         112         (84 )  
Consumer Specialties
    52         43         9         240         187         53    
Industrial Specialties
    44         18         26         73         55         18    
Acetyl Intermediates
    (9 )       133         (142 )       51         520         (469 )  
Other Activities
    (70 )       (67 )       (3 )       (237 )       (257 )       20    
                                                             
Total
    49         152         (103 )       155         617         (462 )  
                                                             
Depreciation and amortization
                                                           
Advanced Engineered Materials
    17         19         (2 )       53         58         (5 )  
Consumer Specialties
    13         13         -         37         40         (3 )  
Industrial Specialties
    14         15         (1 )       41         43         (2 )  
Acetyl Intermediates
    34         36         (2 )       93         102         (9 )  
Other Activities
    5         2         3         9         7         2    
                                                             
Total
    83         85         (2 )       233         250         (17 )  
                                                             


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Factors Affecting Segment Net Sales
 
The chart below sets forth the percentage increase (decrease) in net sales attributable to each of the factors indicated for the following business segments.
 
                                         
    Volume     Price     Currency     Other     Total  
    (unaudited)
 
    (in percentages)  
 
Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008
                                       
Advanced Engineered Materials
    (14 )     (3 )     (2 )     -       (19 )
Consumer Specialties
    (14 )     7       (1 )     -       (8 )
Industrial Specialties
    (3 )     (14 )     (1 )     (20 (2)     (38 (1)
Acetyl Intermediates
    (6 )     (30 )     (1 )     -       (37 )
Total Company
    (8 )     (20 )     (1 )     1       (28 )
Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008
                                       
Advanced Engineered Materials
    (31 )     1       (4 )     -       (34 )
Consumer Specialties
    (11 )     7       (2 )     -       (6 )
Industrial Specialties
    (14 )     (9 )     (4 )     (7 (2)     (34 (1)
Acetyl Intermediates
    (12 )     (28 )     (2 )     -       (42 )
Total Company
    (16 )     (17 )     (3 )     3       (33 )
 
 
(1) Includes the effects of the captive insurance companies and the impact of fluctuations in intersegment eliminations.
 
(2) Includes changes related to the sale of PVOH on July 1, 2009.
 
Summary by Business Segment for the Three and Nine Months Ended September 30, 2009 compared to the Three and Nine Months Ended September 30, 2008
 
Advanced Engineered Materials
 
                                                 
    Three Months Ended
    Nine Months Ended
 
    September 30,     September 30,  
                Change
                Change
 
    2009     2008     in $     2009     2008     in $  
    (unaudited)
 
    (in $ millions, except for percentages)  
 
Net sales
    220       272       (52 )     569       866       (297 )
Net sales variance
                                               
Volume
    (14 )%                     (31 )%                
Price
    (3 )%                     1 %                
Currency
    (2 )%                     (4 )%                
Other
    -                       -                  
Other (charges) gains, net
    (6 )     (3 )     (3 )     (19 )     (9 )     (10 )
Operating profit
    21       13       8       2       80       (78 )
Operating margin
    9.5 %     4.8 %             0.4 %     9.2 %        
                                                 
Earnings (loss) from continuing operations before tax
    32       25       7       28       112       (84 )
Depreciation and amortization
    17       19       (2 )     53       58       (5 )


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Our Advanced Engineered Materials segment develops, produces and supplies a broad portfolio of high-performance technical polymers for application in automotive and electronics products, as well as other consumer and industrial applications. The primary products of Advanced Engineered Materials are polyacetal products (“POM”), polyphenylene sulfide (“PPS”), long fiber reinforced thermoplastics (“LFRT”), polybutylene terephthalate (“PBT”), polyethylene terephthalate (“PET”), ultra-high molecular weight polyethylene (“GUR®”) and LCP. POM, PPS, LFRT, PBT and PET are used in a broad range of products including automotive components, electronics, appliances and industrial applications. GUR® is used in battery separators, conveyor belts, filtration equipment, coatings and medical devices. Primary end markets for LCP are electrical and electronics.
 
Advanced Engineered Materials’ net sales decreased 19% and 34% for the three and nine months ended September 30, 2009, respectively, compared to the same periods in 2008. Significant weakness in the global economy resulted in a dramatic decline in demand for automotive, electrical and electronic products as well as for other industrial products. As a result, sales volumes dropped significantly across all product lines. The decline in sales volumes for the three months ended September 30, 2009 was less significant than the decline in sales volumes for the three months ended June 30, 2009 partially driven by special programs like “Cash for Clunkers” in the United States. Unfavorable foreign currency impacts and lower average pricing furthered the decline in net sales.
 
Operating profit increased by $8 million for the three months ended September 30, 2009 compared to the same period in 2008. Lower volumes and prices were more than offset by significantly lower raw material and energy costs. Higher operating profit was also attributable to decreased overall spending as a result of our fixed spending reduction efforts.
 
Operating profit decreased by $78 million for the nine months ended September 30, 2009 compared to the same period in 2008. Lower raw material and energy costs during the nine months ended September 30, 2009 resulting from reduced volumes and decreased overall spending was only partially offset by the significant decline in net sales. Lower operating profit was also attributable to an increase in other charges relating to employee termination benefits.
 
Our equity affiliates have experienced similar volume reductions due to decreased demand during 2009. As a result, our proportional share of net earnings of these affiliates during the nine months ended September 30, 2009 declined modestly compared to the same period in 2008.
 
Consumer Specialties
 
                                                 
    Three Months Ended
    Nine Months Ended
 
    September 30,     September 30,  
                Change
                Change
 
    2009     2008     in $     2009     2008     in $  
    (unaudited)
 
    (in $ millions, except for percentages)  
 
Net sales
    271       295       (24 )     817       869       (52 )
Net sales variance
                                               
Volume
    (14 )%                     (11 )%                
Price
    7 %                     7 %                
Currency
    (1 )%                     (2 )%                
Other
    -                       -                  
Other (charges) gains, net
    (3 )     -       (3 )     (6 )     (1 )     (5 )
Operating profit
    52       42       10       184       138       46  
Operating margin
    19.2 %     14.2 %             22.5 %     15.9 %        
                                                 
Earnings (loss) from continuing operations before tax
    52       43       9       240       187       53  
Depreciation and amortization
    13       13       -       37       40       (3 )
 
Our Consumer Specialties segment consists of our Acetate Products and Nutrinova businesses. Our Acetate Products business primarily produces and supplies acetate tow, which is used in the production of filter products. We


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also produce acetate flake which is processed into acetate fiber in the form of a tow band. Our Nutrinova business produces and sells Sunett®, a high intensity sweetener, and food protection ingredients, such as sorbates, for the food, beverage and pharmaceutical industries.
 
Decreased volumes in our Acetate and Nutrinova businesses and unfavorable foreign currency impacts contributed to decreased net sales during the three and nine month periods ended September 30, 2009 as compared to 2008. Decreased volumes were primarily due to weakness in underlying demand resulting from the global economic downturn. Decreased flake and tow volumes were substantially offset by increased tow pricing during the period.
 
Operating profit increased by $10 million and $46 million for the three and nine months ended September 30, 2009, respectively, compared to the same periods in 2008 largely due to favorable average pricing, decreased fixed plant spending and improved energy costs.
 
Industrial Specialties
 
                                                 
    Three Months Ended
    Nine Months Ended
 
    September 30,     September 30,  
                Change
                Change
 
    2009     2008     in $     2009     2008     in $  
    (unaudited)
 
    (in $ millions, except for percentages)  
 
Net sales
    236       378       (142 )     745       1,129       (384 )
Net sales variance
                                               
Volume
    (3 )%                     (14 )%                
Price
    (14 )%                     (9 )%                
Currency
    (1 )%                     (4 )%                
Other
    (20 )% (1)                     (7 )% (1)                
Other (charges) gains, net
    (2 )     -       (2 )     (5 )     (4 )     (1 )
Operating profit
    44       18       26       73       55       18  
Operating margin
    18.6 %     4.8 %             9.8 %     4.9 %        
                                                 
Earnings (loss) from continuing operations before tax
    44       18       26       73       55       18  
Depreciation and amortization
    14       15       (1 )     41       43       (2 )
 
(1) Includes changes related to the sale of PVOH on July 1, 2009.
 
Our Industrial Specialties segment includes our Emulsions and EVA Performance Polymers businesses. Our Emulsions business is a global leader which produces a broad product portfolio, specializing in vinyl acetate ethylene emulsions, and is a recognized authority on low volatile organic compounds (“VOC”), an environmentally-friendly technology. Our emulsions products are used in a wide array of applications including paints and coatings, adhesives, construction, glass fiber, textiles and paper. EVA Performance Polymers offers a complete line of low-density polyethylene and specialty ethylene vinyl acetate resins and compounds. EVA Performance Polymers’ products are used in many applications including flexible packaging films, lamination film products, hot melt adhesives, medical tubing, automotive, carpeting and solar cell encapsulation films.
 
In July 2009, we completed the sale of our PVOH business to Sekisui Chemical Co., Ltd. (“Sekisui”) for a net cash purchase price of $168 million, excluding the value of accounts receivable and payable retained by Celanese. The transaction resulted in a gain on disposition of $34 million and includes long-term supply agreements between Sekisui and Celanese.
 
Net sales declined during the three months ended September 30, 2009 compared to the same period in 2008 due to the sale of our PVOH business on July 1, 2009 and decreased pricing in our Emulsions and EVA Performance Polymers businesses. Emulsions volumes were flat, as declines in North America were offset by volume increases in Asia and Europe. EVA Performance Polymers’ volumes declined due to production shortfalls related to technical


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issues at our Edmonton, Alberta, Canada plant at the beginning of the third quarter. Such technical production issues have been resolved and normal operations resumed prior to the end of the third quarter of 2009. Net sales declined during the nine months ended September 30, 2009 compared to the same period in 2008 due primarily to volume and price reductions resulting from the economic downturn. Unfavorable currency impacts also contributed to the decline during the period.
 
Operating profit increased $26 million for the three months ended September 30, 2009 compared to the same period in 2008 due to the $34 million gain on the sale of our PVOH business. Declining net sales were offset by lower raw material and energy costs and reduced overall spending. Reduced spending is attributable to our fixed spending reduction efforts, restructuring efficiencies and favorable foreign currency impacts. Operating profit increased $18 million for the nine months ended September 30, 2009 compared to the same period in 2008, as decreases in raw material and energy costs and reduced overall fixed spending offset lower net sales. Depreciation and amortization for the nine months ended September 30, 2009 included accelerated amortization expense of $5 million related to the AT Plastics trade name.
 
Acetyl Intermediates
 
                                                 
    Three Months Ended
    Nine Months Ended
 
    September 30,     September 30,  
                Change
                Change
 
    2009     2008     in $     2009     2008     in $  
    (unaudited)
 
    (in $ millions, except for percentages)  
 
Net sales
    666       1,056       (390 )     1,860       3,219       (1,359 )
Net sales variance
                                               
Volume
    (6 )%                     (12 )%                
Price
    (30 )%                     (28 )%                
Currency
    (1 )%                     (2 )%                
Other
    -                       -                  
Other (charges) gains, net
    (85 )     (5 )     (80 )     (86 )     (14 )     (72 )
Operating profit (loss)
    (30 )     100       (130 )     22       425       (403 )
Operating margin
    (4.5 )%     9.5 %             1.2 %     13.2 %        
                                                 
Earnings (loss) from continuing operations before tax
    (9 )     133       (142 )     51       520       (469 )
Depreciation and amortization
    34       36       (2 )     93       102       (9 )
 
Our Acetyl Intermediates segment produces and supplies acetyl products, including acetic acid, VAM, acetic anhydride and acetate esters. These products are generally used as starting materials for colorants, paints, adhesives, coatings, medicines and more. Other chemicals produced in this segment are organic solvents and intermediates for pharmaceutical, agricultural and chemical products.
 
Net sales decreased significantly during the three and nine months ended September 30, 2009 compared to the same periods in 2008 due to lower prices across all regions, lower volumes and unfavorable currency impacts. Lower volume was driven by a reduction in underlying demand compared to the same periods in 2008, particularly in Europe and in the Americas. Lower industry utilization of acetyl intermediates products in Europe and the Americas coupled with lower raw material and energy prices drove a reduction in selling prices in these regions during the period.
 
Operating profit declined significantly for the three and nine months ended September 30, 2009 compared to the same periods in 2008, primarily as a result of lower volume and prices, offset partially by lower raw material and energy prices, reduced spending due to the shutdown of our Pampa, Texas facility and other reductions in fixed spending. Depreciation and amortization expense declined primarily as a result of the long-lived asset impairment losses recognized in the fourth quarter of 2008 related to our acetic acid and VAM production facility in Pardies, France, the closure of our VAM production unit in Cangrejera, Mexico in February 2009, coupled with lower


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depreciation expense resulting from the shutdown of our Pampa, Texas facility. Other charges during the nine months ended September 30, 2009 related primarily to the planned shutdown of our Pardies, France facility.
 
In July 2009, we announced that our wholly-owned French subsidiary, Acetex Chimie, completed the consultation procedure with the workers council on its Project of Closure and social plan related to our Pardies, France facility pursuant to which we announced our formal plan to cease all manufacturing operations there and its associated activities. We have agreed with the workers council on a set of measures of assistance aimed at minimizing the effects of the plant’s closing on the Pardies workforce, including training, outplacement, and severance. Other charges included exit costs of $85 million during the three months ended September 30, 2009, which consisted of $58 million in employee termination benefits, $20 million of contract termination costs and $7 million of long-lived asset impairment losses.
 
Other Activities
 
Other Activities primarily consists of corporate center costs, including financing and administrative activities, and the captive insurance companies.
 
Net sales remained flat for the three and nine months ended September 30, 2009.
 
The operating loss for Other Activities decreased $6 million for the nine months ended September 30, 2009 compared to the same period in 2008. The decrease was due largely to $18 million lower selling, general and administrative expenses primarily due to reduced spending on business optimization and finance improvement initiatives. This decrease was offset by increased other charges of $11 million, primarily related to the Sorbates case which occurred during the quarter ended September 30, 2008.
 
The loss from continuing operations before tax decreased $20 million for the nine months ended September 30, 2009, compared to the same period in 2008. This decrease was primarily due to reduced interest expense resulting from lower interest rates on our senior credit facilities, favorable currency impact and lower operating loss discussed above.
 
Liquidity and Capital Resources
 
Our primary source of liquidity is cash generated from operations, available cash and cash equivalents, and dividends from our portfolio of strategic investments. In addition, we have $136 million available for borrowing under our credit-linked revolving facility and $600 million available under our revolving credit facility to assist, if required, in meeting our working capital needs and other contractual obligations.
 
While our contractual obligations, commitments and debt service requirements over the next several years are significant, we continue to believe we will have available resources to meet our liquidity requirements, including debt service, for the remainder of 2009. If our cash flow from operations is insufficient to fund our debt service and other obligations, we may be required to use other means available to us such as increasing our borrowings, reducing or delaying capital expenditures, seeking additional capital or seeking to restructure or refinance our indebtedness. There can be no assurance, however, that we will continue to generate cash flows at or above current levels or that we will be able to maintain our ability to borrow under our revolving credit facilities.
 
As a result of the Pardies, France Project of Closure, we recorded exit costs of $85 million during the three months ended September 30, 2009, which included $58 million in employee termination benefits, $20 million of contract termination costs, and $7 million of long-lived asset impairment losses to Other charges (gains), net, in the accompanying unaudited interim statements of operations. In addition, we recorded $9 million of accelerated depreciation expense for the nine months ended September 30, 2009 and $3 million of environmental remediation reserves for the three months ended September 30, 2009 related to the shutdown of the Pardies, France facility. We may incur up to an additional $17 million in contingent employee termination benefits related to the Pardies, France Project of Closure. We expect that substantially all of the exit costs (except for accelerated depreciation of fixed assets) will result in future cash expenditures over a two-year period. The Pardies, France facility is included in the Acetyl Intermediates segment. Refer to the Acetyl Intermediates section of the MD&A for more detail.
 
On a stand-alone basis, Celanese Corporation has no material assets other than the stock of its subsidiaries and no independent external operations of its own. As such, Celanese Corporation generally will depend on the cash flow


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of its subsidiaries to meet its obligations under its preferred stock, Series A common stock and the senior credit agreement.
 
Cash Flows
 
Cash and cash equivalents as of September 30, 2009 were $1,293 million, an increase of $617 million from December 31, 2008.
 
Net Cash Provided by Operating Activities
 
Cash flow from operations increased $63 million during the nine months ended September 30, 2009 as compared to the same period in 2008. The increase in net earnings (loss) of $47 and the improvements to trade working capital contributed to the increase in cash flow from operations.
 
Net Cash Provided by (Used in) Investing Activities
 
Net cash from investing activities increased from a cash outflow of $169 million for the nine months ended September 30, 2008 to a cash inflow of $191 million for the same period in 2009. Related to the Ticona Kelsterbach plant relocation, cash proceeds of $412 million more than offset cash spent on capital expenditures of $248 million. Proceeds from the sale of businesses and assets of $168 million, related to the sale of our PVOH business, was an increase of $161 million as compared to the same period in 2008. Fewer capital expenditures and less cash spent on the purchase of marketable securities more than offset the decrease in cash received from the sale of marketable securities. Cash used to settle our cross currency swap of $93 million for the nine months ended September 30, 2008 as compared to no settlements in the same period in 2009 also contributed to the increase.
 
Our cash outflow for capital expenditures was $130 million and $212 million for the nine months ended September 30, 2009 and 2008, respectively. Capital expenditures were primarily related to major replacements of equipment, capacity expansions, major investments to reduce future operating costs and environmental and health and safety initiatives. Capital expenditures are expected to be approximately $185 million for 2009, excluding amounts related to the relocation of our Ticona plant in Kelsterbach. Cash outflows for capital expenditures for our Ticona plant in Kelsterbach are expected to range from $350 million to $370 million during 2009.
 
Net Cash Used in Financing Activities
 
Net cash used in financing activities decreased from a cash outflow of $402 million for the nine months ended September 30, 2008 to a cash outflow of $52 million for the same period in 2009. The $350 million decrease in cash used in financing activities primarily related to cash outflows attributable to the repurchase of shares during the nine months ended September 30, 2008 of $378 million as compared to no shares repurchased during the nine months ended September 30, 2009 which was partially offset by an increase of $25 million in repayments on long-term debt.
 
Debt and Capital
 
On October 5, 2009, we declared a cash dividend of $0.265625 per share on our 4.25% convertible perpetual preferred stock amounting to $2 million and a cash dividend of $0.04 per share on our Series A common stock amounting to $6 million. Both cash dividends are for the period from August 3, 2009 to November 1, 2009 and will be paid on November 2, 2009 to holders of record as of October 15, 2009.
 
In February 2008, our Board of Directors authorized the repurchase of up to $400 million of our Series A common stock. This authorization was increased to $500 million in October 2008. The authorization gives management discretion in determining the conditions under which shares may be repurchased. This repurchase program does not have an expiration date. As of September 30, 2009, we have purchased 9,763,200 shares of our Series A common stock at an average purchase price of $38.68 per share for a total of $378 million pursuant to this authorization. For the nine months ended September 30, 2009, no shares of our Series A common stock were repurchased.


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As of September 30, 2009, we had total debt of $3,577 million compared to $3,533 million as of December 31, 2008. We were in compliance with all of the covenants related to our debt agreements as of September 30, 2009.
 
Our senior credit agreement consists of $2,280 million of US dollar-denominated and €400 million of Euro-denominated term loans due 2014, a $600 million revolving credit facility terminating in 2013 and a $228 million credit-linked revolving facility terminating in 2014. Borrowings under the senior credit agreement bear interest at a variable interest rate based on LIBOR (for US dollars) or EURIBOR (for Euros), as applicable, or, for US dollar-denominated loans under certain circumstances, a base rate, in each case plus an applicable margin. The applicable margin for the term loans and any loans under the credit-linked revolving facility is 1.75%, subject to potential reductions as defined in the senior credit agreement. As of September 30, 2009, the applicable margin was 1.75%. The term loans under the senior credit agreement are subject to amortization at 1% of the initial principal amount per annum, payable quarterly. The remaining principal amount of the term loans is due on April 2, 2014.
 
As of September 30, 2009, there were $92 million of letters of credit issued under the credit-linked revolving facility and $136 million remained available for borrowing. As of September 30, 2009, there were no outstanding borrowings or letters of credit issued under the revolving credit facility.
 
On June 30, 2009, we entered into an amendment to the senior credit agreement. The amendment reduced the amount available under the revolving credit portion of the senior credit agreement from $650 million to $600 million and increased the first lien senior secured leverage ratio covenant that is applicable when any amount is outstanding under the revolving credit portion of the senior credit agreement. Prior to giving effect to the amendment, the maximum first lien senior secured leverage ratio was 3.90 to 1.00. As amended, the maximum senior secured leverage ratio for the following trailing four-quarter periods is as follows:
 
     
    First Lien Senior Secured
    Leverage Ratio
 
September 30, 2009
  5.75 to 1.00
December 31, 2009
  5.25 to 1.00
March 31, 2010
  4.75 to 1.00
June 30, 2010
  4.25 to 1.00
September 30, 2010
  4.25 to 1.00
December 31, 2010 and thereafter
  3.90 to 1.00
 
As a condition to borrowing funds or requesting that letters of credit be issued under the revolving credit facility, our first lien senior secured leverage ratio (as calculated as of the last day of the most recent fiscal quarter for which financial statements have been delivered under the revolving facility) cannot exceed a certai