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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
Form 10-K
 
 
     
þ
  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008
    OR
o
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
001-32410
(Commission File Number)
 
 
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)
(972) 443-4000
 
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act
 
     
    Name of Each Exchange
Title of Each Class
 
on Which Registered
 
Series A Common Stock, par value $0.0001 per share
  New York Stock Exchange
4.25% Convertible Perpetual Preferred Stock, par value $0.01 per share (liquidation preference $25.00
per share)
  New York Stock Exchange
 
Securities registered pursuant to Section 12(g) of the Act
None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes þ     No o
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ
 
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  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 12-b2 of the Act).  Yes o     No þ
 
The aggregate market value of the registrant’s common stock held by non-affiliates as of June 30, 2008 (the last business day of the registrants’ most recently completed second fiscal quarter) was $6,927,608,530.
 
The number of outstanding shares of the registrant’s Series A Common Stock, $0.0001 par value, as of February 6, 2009 was 143,505,708.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
Certain portions of the registrant’s Definitive Proxy Statement relating to the 2009 annual meeting of shareholders, to be filed with the Securities and Exchange Commission, are incorporated by reference into Part III.
 


 

 
CELANESE CORPORATION
 
Form 10-K
For the Fiscal Year Ended December 31, 2008
 
TABLE OF CONTENTS
 
                 
        Page
 
    3  
 
PART I
      Business     3  
      Risk Factors     17  
      Unresolved Staff Comments     26  
      Properties     27  
      Legal Proceedings     29  
      Submission of Matters to a Vote of Security Holders     29  
 
PART II
      Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities     30  
      Selected Financial Data     33  
      Management’s Discussion and Analysis of Financial Condition and Results of Operations     35  
      Quantitative and Qualitative Disclosures About Market Risk     59  
      Financial Statements and Supplementary Data     61  
      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure     63  
      Controls and Procedures     63  
      Other Information     65  
 
PART III
      Directors, Executive Officers and Corporate Governance     65  
      Executive Compensation     65  
      Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters     65  
      Certain Relationships and Related Transactions and Director Independence     65  
      Principal Accounting Fees and Services     65  
 
PART IV
      Exhibits and Financial Statement Schedules     65  
    67  
 EX-21.1
 EX-23.1
 EX-31.1
 EX-31.2
 EX-32.1
 EX-32.2
 EX-99.1


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Special Note Regarding Forward-Looking Statements
 
Certain statements in this Annual Report are forward-looking in nature as defined in the Private Securities Litigation Reform Act of 1995. These statements, and other written and oral forward-looking statements made by the Company from time to time, may relate to, among other things, such matters as planned and expected capacity increases and utilization; anticipated capital spending; environmental matters; legal proceedings; exposure to, and effects of hedging of, raw material and energy costs and foreign currencies; global and regional economic, political, and business conditions; expectations, strategies, and plans for individual assets and products, segments, as well as for the whole Company; cash requirements and uses of available cash; financing plans; pension expenses and funding; anticipated restructuring, divestiture, and consolidation activities; cost reduction and control efforts and targets and integration of acquired businesses. These plans and expectations are based upon certain underlying assumptions, and are in turn based upon internal estimates and analyses of current market conditions and trends, management plans and strategies, economic conditions, and other factors. Actual results could differ materially from expectations expressed in the forward-looking statements if one or more of the underlying assumptions and expectations proves to be inaccurate or is unrealized. Certain important factors that could cause actual results to differ materially from those in the forward-looking statements are included with such forward-looking statements and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Forward-Looking Statements May Prove Inaccurate.”
 
Item 1.   Business
 
Basis of Presentation
 
In this Annual Report on Form 10-K, 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, formerly 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.
 
Overview
 
Celanese Corporation was formed in 2004 when affiliates of The Blackstone Group purchased 84% of the ordinary shares of Celanese GmbH, formerly known as Celanese AG, a diversified German chemical company. Celanese Corporation was incorporated in 2005 under the laws of the state of Delaware and its shares are traded on the New York Stock Exchange under the symbol “CE”. During the period from 2005-2007, Celanese Corporation purchased the remaining 16% interest in Celanese GmbH.
 
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 our principles and objectives, and a clear focus on growth and value creation.
 
Our large and diverse global customer base primarily consists of major companies in a broad array of industries. For the year ended December 31, 2008, approximately 28% of our net sales were to customers located in North America, 43% to customers in Europe and Africa, 26% to customers in Asia and Australia and 3% to customers in South America. We have property, plant and equipment in the United States of $732 million and outside the United States of $1,739 million. For more information regarding our property, plant and equipment, see Note 9 and Note 25 to the consolidated financial statements.
 
Market Industry
 
This Annual Report on Form 10-K includes industry data obtained from industry publications and surveys as well as our own internal company surveys. Third-party industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable. The statements


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regarding Celanese’s market position in this document are based on information derived from, among others, the 2008 Stanford Research Institute International Chemical Economics Handbook, CMAI 2008 World Methanol Analysis, Tecnon OrbiChem Acetic Acid and Vinyl Acetate World Survey third quarter 2008 report and Synthetic Latex Polymer Reports from Kline and Co.
 
Segment Overview
 
We operate principally through four business segments: Advanced Engineered Materials, Consumer Specialties, Industrial Specialties and Acetyl Intermediates. For further details on our business segments, see Note 25 to the consolidated financial statements. The table below illustrates each segment’s net sales to external customers for the year ended December 31, 2008, as well as each segment’s major products and end-use markets.
 
                 
    Advanced
           
    Engineered Materials   Consumer Specialties   Industrial Specialties   Acetyl Intermediates
 
2008 Net Sales(1)
  $1,061 million   $1,155 million   $1,406 million   $3,199 million
                 
Key Products
 
• Polyacetal products (“POM”)
• Ultra-high molecular weight polyethylene (“GUR®”)
• Liquid crystal polymers (“LCP”)
• Polyphenylene sulfide (“PPS”)
• Polybutylene terephthalate (“PBT”)
• Polyethylene terephthalate (“PET”)
• Long fiber reinforced thermoplastics (“LFRT”)
 
• Acetate tow
• Acetate flake
• Sunett® sweetener
• Sorbates
 
• Polyvinyl alcohol (“PVOH”)
• Polyvinyl acetate
• Conventional emulsions
• Vinyl acetate ethylene emulsions
• Low-density polyethylene resins (“LDPE”)
• Ethylene vinyl acetate (“EVA”) resins and compounds
 
• Acetic acid
• Vinyl acetate monomer (“VAM”)
• Acetic anhydride
• Acetaldehyde
• Ethyl acetate
• Butyl acetate
• Formaldehyde

                 
Major End-Use Markets
 
• Fuel system components
• Conveyor belts
• Battery separators
• Electronics
• Seat belt mechanisms
• Other automotive
• Appliances and electronics
• Filtrations
• Coatings
• Medical Devices
• Telecommunications
 
• Filter products
• Beverages
• Confections
• Baked goods
• Pharmaceuticals
 
• Paints
• Coatings
• Adhesives
• Building products
• Glass fibers
• Textiles
• Paper
• Flexible packaging
• Lamination products
• Medical tubing
• Automotive parts
 
• Paints
• Coatings
• Adhesives
• Lubricants
• Detergents
• Pharmaceuticals
• Films
• Textiles
• Inks
• Plasticizers
• Esters
• Solvents
 
 
(1) Consolidated net sales of $6,823 million for the year ended December 31, 2008 also includes $2 million in net sales from Other Activities, which is attributable to our captive insurance companies. Acetyl Intermediates’ net sales exclude inter-segment sales of $676 million for the year ended December 31, 2008.
 
Advanced Engineered Materials
 
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. Together with our strategic affiliates, we are a leading participant in the global technical polymers industry. The primary products of Advanced Engineered Materials are POM, PPS, LFRT, PBT, PET, 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.


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Consumer Specialties
 
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 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 pharmaceuticals industries.
 
Industrial Specialties
 
Our Industrial Specialties segment includes our Emulsions, PVOH and AT Plastics 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 VOC (volatile organic compounds), an environmentally-friendly technology. As a global leader, our PVOH business produces a broad portfolio of performance PVOH chemicals engineered to meet specific customer requirements. Our emulsions and PVOH products are used in a wide array of applications including paints and coatings, adhesives, building and construction, glass fiber, textiles and paper. AT Plastics offers a complete line of low-density polyethylene and specialty ethylene vinyl acetate resins and compounds. AT Plastics’ 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.
 
Acetyl Intermediates
 
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.
 
Competitive Strengths
 
We benefit from a number of competitive strengths, including the following:
 
Leading Market Positions
 
We believe that we are a leading global integrated producer of acetyl, acetate and vinyl emulsion products. Advanced Engineered Materials and our strategic affiliates, Polyplastics Co., Ltd. (“Polyplastics”) and Korea Engineering Plastics Co., Ltd. (“KEPCO”), are leading producers and suppliers of engineered polymers in North America, Europe and the Asia/Pacific region. Our leadership positions are based on our large share of global production capacity, operating efficiencies, proprietary technology and competitive cost structures in our major product lines.
 
Proprietary Production Technology and Operating Expertise
 
Our production of acetyl products employs industry-leading proprietary and licensed technologies, including our proprietary AOPlustm technology for the production of acetic acid and VAntagetm and VAntage Plustm vinyl acetate monomer technology. AOPlustm enables increased raw material efficiencies, lower operating costs and the ability to expand plant capacity with minimal investment. VAntagetm and VAntage Plustm enable significant increases in production efficiencies, lower operating costs and increases in capacity at ten to fifteen percent of the cost of building a new plant.
 
Low Cost Producer
 
Our competitive cost structures are based on production and purchasing economies of scale, vertical integration, technical expertise and the use of advanced technologies.
 
Global Reach
 
We operate thirty-two production facilities throughout the world. We participate in strategic alliances which operate nine additional facilities. Our infrastructure of manufacturing plants, terminals, warehouses and sales offices provides us with a competitive advantage in anticipating and meeting the needs of our global and local customers in well-established and growing markets, while our geographic diversity reduces the potential impact of


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volatility in any individual country or region. We have a strong, growing presence in Asia, particularly in China, and we have a defined strategy to continue this growth. For more information regarding our financial information with respect to our geographic areas, see Note 25 to the consolidated financial statements.
 
Growth
 
We aggressively align with our customers and their markets to capture growth. We are quickly expanding in Asia, the fastest-growing region in the world, in order to meet increasing demand for our products. As part of our strategy, we also continue to develop new products and industry-leading production technologies that deliver value-added solutions for our customers.
 
Strategic Investments
 
Our strategic investments have enabled us to gain access, minimize costs and accelerate growth in new markets, while also generating significant cash flow and earnings. Our equity investments and cost investments represent an important component of our growth strategy. See Note 8 to the consolidated financial statements and the “Investments” subheading of Item 1 for additional information on our equity and cost investments.
 
Diversified Products and End-Use Markets
 
We offer our customers a broad range of products in a wide variety of end-use markets. Our diversified product lines include paints and coatings, textiles, automotive applications, consumer and medical applications, performance industrial applications, filter media, paper and packaging, chemical additives, construction, consumer and industrial adhesives, and food and beverage applications. This product and market diversity reduces the potential impact of volatility in any individual market segment.
 
Business Strategies
 
Our strategic foundation is based on the following four pillars which are focused on increasing operating cash flows, improving profitability, delivering high return on investments and increasing shareholder value:
 
Focus
 
We focus on businesses where we have a sustainable and proven competitive advantage. We continue to optimize our business portfolio in order to achieve market, cost and technology leadership while expanding our product mix into higher value-added products.
 
Investment
 
We leverage and build on advantaged positions that optimize our portfolio of products. In order to increase our competitive advantage, we have invested in our core group of businesses through acquisitions; growth in Asia bolstered by our integrated chemical complex in Nanjing, China; and new applications of our advanced engineered polymers products.
 
Redeployment
 
We divest non-core assets and revitalize underperforming businesses. We have divested or exited businesses where we no longer maintain a competitive advantage. We also continue to make key strategic decisions to revitalize businesses that have significant potential for improved performance and enhanced efficiency.
 
Underlying all of these strategies is a culture of execution and productivity. We continually seek ways to reduce costs, increase productivity and improve process technology. Our commitment to operational excellence is an integral part of our strategy to maintain our cost advantage and productivity leadership.
 
Business Segments
 
Advanced Engineered Materials
 
Our Advanced Engineered Materials segment develops, produces and supplies a broad portfolio of high-performance technical polymers.


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Advanced Engineered Materials’ technical polymers have chemical and physical properties enabling them, among other things, to withstand extreme temperatures, resist chemical reactions with solvents and withstand fracturing or stretching. These products are used in a wide range of performance-demanding applications in the automotive and electronics sectors as well as in other consumer and industrial goods.
 
Advanced Engineered Materials works in concert with its customers to enable innovations and develop new or enhanced products. Advanced Engineered Materials focuses its efforts on developing new markets and applications for its product lines, often developing custom formulations to satisfy the technical and processing requirements of a customer’s applications. For example, Advanced Engineered Materials has collaborated with fuel system suppliers to develop an acetal copolymer with the chemical and impact resistance necessary to withstand exposure to hot diesel fuels in the new generation of common rail diesel engines. The product can also be used in automotive fuel sender units where it remains stable at the high operating temperatures present in direct-injection diesel engines and can meet the requirements of the new generation of bio fuels.
 
Advanced Engineered Materials’ customer base consists primarily of a large number of plastic molders and component suppliers, which typically supply original equipment manufacturers (“OEMs”). Advanced Engineered Materials works with these molders and component suppliers as well as directly with the OEMs to develop and improve specialized applications and systems.
 
Prices for most of these products, particularly specialized product grades for targeted applications, generally reflect the value added in complex polymer chemistry, precision formulation and compounding, and the extensive application development services provided. These specialized product lines are not typically susceptible to cyclical swings in pricing.
 
Key Products
 
POM is sold under the trademark Hostaform® in all regions but North America, where it is sold under the trademark Celcon®. Polyplastics and KEPCO are leading suppliers of POM and other engineering resins in the Asia/Pacific region. POM is used for mechanical parts, including door locks and seat belt mechanisms, in automotive applications and in electrical, consumer and medical applications such as drug delivery systems and gears for large appliances.
 
The primary raw material for POM is formaldehyde, which is manufactured from methanol. Advanced Engineered Materials currently purchases formaldehyde in the United States from our Acetyl Intermediates segment and, in Europe, manufactures formaldehyde from purchased methanol.
 
GUR® is an engineered material used in heavy-duty automotive and industrial applications such as car battery separator panels and industrial conveyor belts, as well as in specialty medical and consumer applications, such as sports equipment and prostheses. GUR® micro powder grades are used for high-performance filters, membranes, diagnostic devices, coatings and additives for thermoplastics and elastomers. GUR® fibers are also used in protective ballistic applications.
 
Celstran® and Compel® are long fiber reinforced thermoplastics, which impart extra strength and stiffness, making them more suitable for larger parts than conventional thermoplastics and are used in automotive, transportation and industrial applications.
 
Polyesters such as Celanex® PBT, Celanex® PET, Vandar®, a series of PBT-polyester blends and Riteflex®, a thermoplastic polyester elastomer, are used in a wide variety of automotive, electrical and consumer applications, including ignition system parts, radiator grilles, electrical switches, appliance and sensor housings, light emitting diodes (“LEDs”) and technical fibers. Raw materials for polyesters vary. Base monomers, such as dimethyl terephthalate and purified terephthalic acid (“PTA”), are widely available with pricing dependent on broader polyester fiber and packaging resins market conditions. Smaller volume specialty co-monomers for these products are typically supplied by a limited number of companies.
 
Liquid crystal polymers, such as Vectra®, are used in electrical and electronics applications and for precision parts with thin walls and complex shapes or on high-heat cookware applications.


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Fortron®, a PPS product, is used in a wide variety of automotive and other applications, especially those requiring heat and/or chemical resistance, including fuel system parts, radiator pipes and halogen lamp housings, often replacing metal. Other possible application fields include non-woven filtration devices such as coal fired power plants. Fortron® is manufactured by Fortron Industries LLC, Advanced Engineered Materials’ 50% owned strategic venture with Kureha Corporation of Japan.
 
Facilities
 
Advanced Engineered Materials has polymerization, compounding and research and technology centers in Germany, Brazil, China and the United States.
 
Markets
 
The following table illustrates the destination of the net sales of the Advanced Engineered Materials segment by geographic region for the years ended December 31, 2008, 2007 and 2006.
 
Net Sales to External Customers by Destination — Advanced Engineered Materials
 
                                                 
    Year Ended December 31,  
    2008     2007     2006  
          % of
          % of
          % of
 
    $     Segment     $     Segment     $     Segment  
    (In millions, except percentages)  
 
North America
    365       34 %     388       38 %     311       34 %
Europe/Africa
    553       52 %     517       50 %     500       55 %
Asia/Australia
    106       10 %     88       8 %     55       6 %
South America
    37       4 %     37       4 %     49       5 %
                                                 
Total
    1,061               1,030               915          
                                                 
 
Advanced Engineered Materials’ sales in the Asian market are made directly and through its strategic affiliates. Polyplastics, KEPCO and Fortron Industries are accounted for under the equity method and therefore not included in Advanced Engineered Materials’ consolidated net sales. If Advanced Engineered Materials’ portion of the sales made by these strategic affiliates were included in the table above, the percentage of sales sold in Asia/Australia would be substantially higher. A number of Advanced Engineered Materials’ POM customers, particularly in the appliance, electrical components and certain sections of the electronics/telecommunications fields, have moved tooling and molding operations to Asia, particularly southern China. In addition to our Advanced Engineered Materials affiliates, we directly service Asian demand offering our customers global solutions.
 
Advanced Engineered Materials’ principal customers are consumer product manufacturers and suppliers to the automotive industry. These customers primarily produce engineered products, and Advanced Engineered Materials collaborates with its customers to assist in developing and improving specialized applications and systems. Advanced Engineered Materials has long-standing relationships with most of its major customers, but also uses distributors for its major products, as well as a number of electronic marketplaces to reach a larger customer base. For most of Advanced Engineered Materials’ product lines, contracts with customers typically have a term of one to two years.
 
Competition
 
Advanced Engineered Materials’ principal competitors include BASF AG (“BASF”), E. I. DuPont de Nemours and Company (“DuPont”), DSM N.V., Sabic Innovative Plastics and Solvay S.A. Smaller regional competitors include Asahi Kasei Corporation, Mitsubishi Gas Chemicals, Inc., Chevron Phillips Chemical Company, L.P., Braskem S.A., Lanxess AG, Teijin, Sumitomo, Inc. and Toray Industries Inc.
 
Consumer Specialties
 
The 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.
 
Key Products
 
Acetate tow is used primarily in cigarette filters. We produce acetate flake by processing wood pulp with acetic anhydride. We purchase wood pulp that is made from reforested trees from major suppliers and produce acetic anhydride internally. The acetate flake is then further processed into acetate fiber in the form of a tow band. According to the 2008 Stanford Research Institute International Chemical Economics Handbook, we are the world’s leading producer of acetate tow, including production of our China ventures.
 
Sales of acetate tow amounted to approximately 12%, 11% and 9% of our consolidated net sales for the years ended December 31, 2008, 2007 and 2006, respectively.
 
We have an approximate 30% interest in three manufacturing China ventures, which are accounted for as cost method investments (Note 8) that produce acetate flake and tow. Our partner in each of the ventures is the Chinese state-owned tobacco entity, China National Tobacco Corporation. In addition, approximately 10% of our 2008 acetate tow sales were sold directly to China, the largest single market for acetate tow in the world.
 
Acesulfame potassium, a high intensity sweetener marketed under the trademark Sunett®, is used in a variety of beverages, confections and dairy products throughout the world. Sunett® pricing for targeted applications reflects the value added by Nutrinova, through consistent product quality and reliable supply. Nutrinova’s strategy is to be the most reliable and highest quality producer of this product, to develop new product applications and expand into new markets.
 
Nutrinova’s food ingredients business consists of the production and sale of food protection ingredients, such as sorbic acid and sorbates, and high intensity sweeteners worldwide. Nutrinova’s food protection ingredients are mainly used in foods, beverages and personal care products. The primary raw materials for these products are ketene and crotonaldehyde. Sorbates pricing is extremely sensitive to demand and industry capacity and is not necessarily dependent on the prices of raw materials.
 
Facilities
 
Acetate Products has production sites in the United States, Mexico, the United Kingdom and Belgium, and participates in three manufacturing ventures in China.
 
Nutrinova has production facilities in Germany, as well as sales and distribution facilities in all major world markets.
 
Markets
 
The following table illustrates the destination of the net sales of the Consumer Specialties segment by geographic region for the years ended December 31, 2008, 2007 and 2006.
 
Net Sales to External Customers by Destination — Consumer Specialties
 
                                                 
    Year Ended December 31,  
    2008     2007     2006  
          % of
          % of
          % of
 
    $     Segment     $     Segment     $     Segment  
    (In millions, except percentages)  
 
North America
    194       17 %     201       18 %     204       23 %
Europe/Africa
    497       43 %     427       39 %     248       28 %
Asia/Australia
    413       36 %     437       39 %     395       45 %
South America
    51       4 %     46       4 %     29       4 %
                                                 
Total
    1,155               1,111               876          
                                                 


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Sales of acetate tow are principally to the major tobacco companies that account for a majority of worldwide cigarette production. Our contracts with most of our customers are entered into on an annual basis.
 
Nutrinova primarily markets Sunett® to a limited number of large multinational and regional customers in the beverage and food industry under long-term and annual contracts. Nutrinova markets food protection ingredients primarily through regional distributors to small and medium sized customers and directly through regional sales offices to large multinational customers in the food industry.
 
Competition
 
Acetate Products’ principal competitors include Daicel Chemical Industries Ltd. (“Daicel”), Eastman Chemical Corporation (“Eastman”) and Rhodia S.A.
 
The principal competitors for Nutrinova’s Sunett® sweetener are Holland Sweetener Company, The NutraSweet Company, Ajinomoto Co., Inc., Tate & Lyle PLC and several Chinese manufacturers. In sorbates, Nutrinova competes with Nantong AA, Daicel, Yu Yao/Ningbo, Yancheng AmeriPac and other Chinese manufacturers of sorbates.
 
Industrial Specialties
 
Our Industrial Specialties segment includes our Emulsions, PVOH and AT Plastics 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 VOC, an environmentally-friendly technology. As a global leader, our PVOH business produces and sells a broad portfolio of performance PVOH chemicals engineered to meet specific customer requirements. AT Plastics offers a complete line of low-density polyethylene and specialty, ethylene vinyl acetate resins and compounds.
 
Key Products
 
The products in our Emulsions business include conventional vinyl and acrylate based emulsions and high-pressure vinyl acetate ethylene emulsions. Emulsions are made from VAM, acrylate esters and styrene. Our Emulsions business is a leading producer of polyvinyl acetate and vinyl acetate ethylene emulsions in Europe. These products are a key component of water-based architectural coatings, adhesives, non-wovens, textiles, glass fiber and other applications.
 
Sales from the Emulsions business amounted to approximately 13%, 14% and 14% of our consolidated net sales for the years ended December 31, 2008, 2007 and 2006, respectively.
 
PVOH is used in adhesives, building products, paper coatings, films and textiles. The primary raw material to produce PVOH is VAM, while acetic acid is produced as a by-product. Products are sold on a global basis and prices vary depending on industry segment and end-use application. According to industry sources on PVOH, we are the largest North American producer of PVOH and the third largest producer in the world.
 
AT Plastics produces low-density polyethylene and EVA resins and compounds that are used in the manufacture of hot melt adhesives, automotive carpeting, lamination film products, flexible packaging films, medical tubing and solar cell encapsulation films. EVA resins and compounds are produced in high-pressure reactors from ethylene and VAM.
 
Facilities
 
Emulsions has production sites in the United States, Canada, China, Spain, Sweden, the Netherlands and Germany. PVOH has production sites in the United States and Spain along with sales and distribution facilities in Europe, Asia and South America. During 2008, we shut down our Slovenia and United Kingdom facilities. AT Plastics has a production facility in Edmonton, Alberta, Canada.


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Markets
 
The following table illustrates the destination of the net sales of the Industrial Specialties segment by geographic region for years ended December 31, 2008, 2007 and 2006.
 
Net Sales to External Customers by Destination — Industrial Specialties
 
                                                 
    Year Ended December 31,  
    2008     2007     2006  
          % of
          % of
          % of
 
    $     Segment     $     Segment     $-     Segment  
    (In millions, except percentages)  
 
North America
    617       44 %     583       43 %     605       47 %
Europe/Africa
    684       48 %     674       50 %     601       47 %
Asia/Australia
    81       6 %     69       5 %     58       5 %
South America
    24       2 %     20       2 %     17       1 %
                                                 
Total
    1,406               1,346               1,281          
                                                 
 
Industrial Specialties’ products are sold to a diverse group of regional and multinational customers. Customers for emulsions are manufacturers of water-based paints and coatings, adhesives, paper, building and construction products, glass fiber, non-wovens and textiles. The customers of the PVOH business, who purchase mainly under multi-year contracts, are primarily engaged in the production of adhesives, paper, films, building products and textiles. Customers of AT Plastics are primarily engaged in the manufacture of adhesives, automotive components, packaging materials, print media and solar energy products.
 
Competition
 
Principal competitors in the Emulsions business include The Dow Chemical Company (“Dow”), Rohm & Haas Company, BASF, Dairen, Wacker and several smaller regional manufacturers.
 
Principal competitors in the PVOH business include Kuraray Co., Ltd., DuPont, Chang Chun Petrochemical Co., Ltd., The Nippon Synthetic Chemical Industry Co., Ltd. and several Chinese manufacturers.
 
Principal competitors for the AT Plastics EVA resins and compounds business include DuPont, ExxonMobil Chemical, Arkema and several Asian manufacturers.
 
Acetyl Intermediates
 
Our Acetyl Intermediates segment produces and supplies acetyl products, including acetic acid, VAM, acetic anhydride and acetate esters. Other chemicals produced in this segment are organic solvents and intermediates for pharmaceutical, agricultural and chemical products.
 
Key Products
 
Acetyls.  Acetyls products include acetic acid, VAM, acetic anhydride and acetaldehyde. Acetic acid is primarily used to manufacture VAM, PTA and other acetyl derivatives. VAM is used in a variety of adhesives, paints, films, coatings and textiles. Acetic anhydride is a raw material used in the production of cellulose acetate, detergents and pharmaceuticals. Acetaldehyde is a major feedstock for the production of polyols. Acetaldehyde is also used in other organic compounds such as pyridines, which are used in agricultural products. We manufacture acetic acid, VAM and acetic anhydride for our own use, as well as for sale to third parties.
 
Acetic acid and VAM, our basic acetyl intermediates products, are impacted by global supply/demand fundamentals and are cyclical in nature. The principal raw materials in these products are ethylene, which we purchase from numerous sources; carbon monoxide, which we purchase under long-term contracts; and methanol, which we purchase under long-term and short-term contracts. With the exception of carbon monoxide, these raw materials are commodity products available from a wide variety of sources.


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Our production of acetyl products employs leading proprietary and licensed technologies, including our proprietary AOPlustm technology for the production of acetic acid and VAntagetm and VAntage Plustm vinyl acetate monomer technology.
 
Solvents and Derivatives.  Solvents and derivatives products include a variety of solvents, formaldehyde and other chemicals, which in turn are used in the manufacture of paints, coatings, adhesives and other products.
 
Many solvents and derivatives products are derived from our production of acetic acid. Primary products are:
 
  •  Ethyl acetate, an acetate ester that is a solvent used in coatings, inks and adhesives and in the manufacture of photographic films and coated papers; and
 
  •  Butyl acetate, an acetate ester that is a solvent used in inks, pharmaceuticals and perfume.
 
Formaldehyde and formaldehyde derivative products are derivatives of methanol and are made up of the following products:
 
  •  Formaldehyde, paraformaldehyde and formcels are primarily used to produce adhesive resins for plywood, particle board, coatings, POM engineering resins and a compound used in making polyurethane;
 
  •  Amines such as methyl amines, monisopropynol amines and butyl amines are used in agrochemicals, herbicides and the treatment of rubber and water; and
 
  •  Special solvents, such as crotonaldehyde, which are used by the Nutrinova business line for the production of sorbates, as well as raw materials for the fragrance and food ingredients industry.
 
Solvents and derivatives are commodity products characterized by cyclicality in pricing. The principal raw materials used in solvents and derivatives products are acetic acid, various alcohols, methanol, ethylene and ammonia. We manufacture many of these raw materials for our own use as well as for sales to third parties, including our competitors in the solvents and derivatives business. We purchase ethylene from a variety of sources. We manufacture acetaldehyde in Europe for our own use, as well as for sale to third parties.
 
Sales from acetyl products amounted to approximately 35%, 34% and 33% of our consolidated net sales for the years ended December 31, 2008, 2007 and 2006, respectively. Sales from solvents and derivatives products amounted to approximately 12%, 12% and 13% of our consolidated net sales for the years ended December 31, 2008, 2007 and 2006, respectively.
 
Facilities
 
Acetyl Intermediates has production sites in the United States, China, Mexico, Singapore, Spain, France and Germany. We also participate in a strategic venture in Saudi Arabia that produces methanol and methyl tertiary-butyl ether (“MTBE”). Over the last few years, we have continued to shift our production capacity to lower cost production facilities while expanding in growth markets, such as China.


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Markets
 
The following table illustrates net sales by destination of the Acetyl Intermediates segment by geographic region for the years ended December 31, 2008, 2007 and 2006.
 
Net Sales to External Customers by Destination — Acetyl Intermediates
 
                                                 
    Year Ended December 31,  
    2008     2007     2006  
          % of
          % of
          % of
 
    $     Segment     $     Segment     $     Segment  
    (In millions, except percentages)  
 
North America
    743       23 %     685       23 %     685       26 %
Europe/Africa
    1,198       37 %     1,183       40 %     1,075       40 %
Asia/Australia
    1,142       36 %     968       33 %     814       30 %
South America
    116       4 %     119       4 %     110       4 %
                                                 
Total(1)
    3,199               2,955               2,684          
                                                 
 
 
(1) Excludes inter-segment sales of $676 million, $660 million and $667 million for the years ended December 31, 2008, 2007 and 2006, respectively.
 
Acetyl Intermediates markets its products both directly to customers and through distributors.
 
Acetic acid, VAM and acetic anhydride are global businesses which have several large customers. Generally, we supply these global customers under multi-year contracts. The customers of acetic acid, VAM and acetic anhydride produce polymers used in water-based paints, adhesives, paper coatings, polyesters, film modifiers, pharmaceuticals, cellulose acetate and textiles. We have long-standing relationships with most of these customers.
 
Solvents and derivatives are sold to a diverse group of regional and multinational customers both under multi-year contracts and on the basis of long-standing relationships. The customers of solvents and derivatives are primarily engaged in the production of paints, coatings and adhesives. We manufacture formaldehyde for our own use as well as for sale to a few regional customers that include manufacturers in the wood products and chemical derivatives industries. The sale of formaldehyde is based on both long and short-term agreements. Specialty solvents and amines are sold globally to a wide variety of customers, primarily in the coatings and resins and the specialty products industries. These products serve global markets in the synthetic lubricant, agrochemical, rubber processing and other specialty chemical areas.
 
Competition
 
Our principal competitors in the Acetyl Intermediates segment include Atofina S.A., BASF, British Petroleum PLC, Chang Chun Petrochemical Co., Ltd., Daicel, Dow, Eastman, DuPont, LyondellBasell Industries, Nippon Gohsei, Perstorp Inc., Rohm & Haas Company, Jiangsu Sopo Corporation (Group) Ltd., Showa Denko K.K., and Kuraray Co. Ltd.
 
Other Activities
 
Other Activities primarily consists of corporate center costs, including financing and administrative activities such as legal, accounting and treasury functions, interest income and expense associated with our financing activities, and our captive insurance companies. Our two wholly-owned captive insurance companies are a key component of our global risk management program, as well as a form of self-insurance for our property, liability and workers compensation risks. The captive insurance companies issue insurance policies to our subsidiaries to provide consistent coverage amid fluctuating costs in the insurance market and to lower long-term insurance costs by avoiding or reducing commercial carrier overhead and regulatory fees. The captive insurance companies retain risk at levels approved by management and obtain reinsurance coverage from third parties to limit the net risk retained. One of the captive insurance companies also insures certain third-party risks.


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Investments
 
We have a significant portfolio of strategic investments, including a number of ventures in Asia, North America and Europe. In aggregate, these strategic investments enjoy significant sales, earnings and cash flow. We have entered into these strategic investments in order to gain access to local markets, minimize costs and accelerate growth in areas we believe have significant future business potential. See Note 8 to the consolidated financial statements for additional information.
 
The table below represents our significant strategic ventures as of December 31, 2008:
 
                             
   
Location
  Ownership    
Segment
 
Partner(s)
  Year Entered  
 
Equity Method Investments
KEPCO
  South Korea     50%     Advanced Engineered
Materials
  Mitsubishi Gas Chemical Company, Inc./Mitsubishi Corporation     1999  
Polyplastics Co., Ltd. 
  Japan     45%     Advanced Engineered
Materials
  Daicel Chemical Industries Ltd.     1964  
Fortron Industries LLC
  US     50%     Advanced Engineered
Materials
  Kureha Corporation     1992  
Cost Method Investments
National Methanol Co. 
  Saudi Arabia     25%     Acetyl Intermediates   Saudi Basic Industries Corporation (“SABIC”)/
CTE Petrochemicals
    1981  
Kunming Cellulose Fibers Co. Ltd. 
  China     30%     Consumer Specialties   China National
Tobacco Corporation
    1993  
Nantong Cellulose Fibers Co. Ltd. 
  China     31%     Consumer Specialties   China National
Tobacco Corporation
    1986  
Zhuhai Cellulose Fibers Co. Ltd. 
  China     30%     Consumer Specialties   China National
Tobacco Corporation
    1993  
 
Major Equity Method Investments
 
Korea Engineering Plastics Co. Ltd.  Founded in 1987, KEPCO is the leading producer of polyacetal in South Korea. Mitsubishi Gas Chemical Company, Inc. owns 40% and Mitsubishi Corporation owns 10% of KEPCO. KEPCO operates a POM plant in Ulsan, South Korea and participates with Polyplastics and Mitsubishi Gas Chemical Company, Inc. in a world-scale POM facility in Nantong, China.
 
Polyplastics Co., Ltd.  Polyplastics is a leading supplier of engineered plastics in the Asia-Pacific region. Polyplastics’ principal production facilities are located in Japan, Taiwan, Malaysia and China. We believe Polyplastics is the largest producer and marketer of POM in the Asia-Pacific region.
 
Fortron Industries LLC.  Fortron Industries LLC is a leading global producer of PPS. Production facilities are located in Wilmington, North Carolina. We believe Fortron has the leading technology in linear polymer applications.
 
Major Cost Method Investments
 
National Methanol Co. (“Ibn Sina”).  With production facilities in Saudi Arabia, National Methanol Co. represents approximately 2% of the world’s methanol production capacity and is the world’s eighth largest producer of MTBE. Methanol and MTBE are key global commodity chemical products. We indirectly own a 25% interest in National Methanol Co. through CTE Petrochemicals, a joint venture with Texas Eastern Arabian Corporation Ltd., with the remainder held by SABIC (50%). SABIC has responsibility for all product marketing.
 
China Acetate Products ventures.  We hold approximately 30% ownership interests (50% board representation) in three separate Acetate Products production entities in China: the Nantong, Kunming and Zhuhai Cellulose Fiber Companies. In each instance, the Chinese state-owned tobacco entity, China National Tobacco Corporation controls the remainder. The China ventures fund operations using operating cash flows.
 
These cost investments where we own greater than a 20% ownership interest are accounted for under the cost method of accounting because we cannot exercise significant influence over these entities. We determined that we


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cannot exercise significant influence over these entities due to local government investment in and influence over these entities, limitations on our involvement in the day-to-day operations and the present inability of the entities to provide timely financial information prepared in accordance with US generally accepted accounting principles.
 
Other Equity Investments
 
InfraServs.  We hold ownership interests in several InfraServ entities located in Germany. InfraServs own and develop industrial parks and provide on-site general and administrative support to tenants. The table below represents our equity investments in InfraServ ventures as of December 31, 2008:
 
         
Company
  Ownership %  
 
InfraServ GmbH & Co. Gendorf KG
    39.0 %
InfraServ GmbH & Co. Knapsack KG
    28.2 %
InfraServ GmbH & Co. Hoechst KG
    31.2 %
 
Raw Materials and Energy
 
We purchase a variety of raw materials and energy from sources in many countries for use in our production processes. We have a policy of maintaining, when available, multiple sources of supply for materials. However, some of our individual plants may have single sources of supply for some of their raw materials, such as carbon monoxide, steam and acetaldehyde. Although we have been able to obtain sufficient supplies of raw materials, there can be no assurance that unforeseen developments will not affect our raw material supply. Even if we have multiple sources of supply for a raw material, there can be no assurance that these sources can make up for the loss of a major supplier. There cannot be any guarantee that profitability will not be affected should we be required to qualify additional sources of supply to our specifications in the event of the loss of a sole supplier. In addition, the price of raw materials varies, often substantially, from year to year.
 
A substantial portion of our products and raw materials are commodities whose prices fluctuate as market supply/demand fundamentals change. Our production facilities rely largely on fuel oil, natural gas and electricity for energy. Most of the raw materials for our European operations are centrally purchased by one of our subsidiaries, which also buys raw materials on behalf of third parties. We manage our exposure through forward purchase contracts, long-term supply agreements and multi-year purchasing and sales agreements. During 2008, we did not enter into any commodity financial derivative contracts. See Note 2 and Note 22 to the consolidated financial statements for additional information.
 
We also currently purchase and lease supplies of various precious metals, such as rhodium, used as catalysts for the manufacture of Acetyl Intermediates products. For precious metals, the leases are distributed between a minimum of three lessors per product and are divided into several contracts.
 
Research and Development
 
All of our businesses conduct research and development activities to increase competitiveness. Our businesses are innovation-oriented and conduct research and development activities to develop new, and optimize existing, production technologies, as well as to develop commercially viable new products and applications. We consider the amount spent during each of the last three fiscal years on research and development activities to be adequate to drive our strategic initiatives.
 
Intellectual Property
 
We attach great importance to patents, trademarks, copyrights and product designs in order to protect our investment in research and development, manufacturing and marketing. Our policy is to seek the widest possible protection for significant product and process developments in our major markets. Patents may cover products, processes, intermediate products and product uses. We also seek to register trademarks extensively as a means of protecting the brand names of our products, which brand names become more important once the corresponding patents have expired. We protect our trademarks vigorously against infringement and also seek to register design protection where appropriate.
 
In most industrial countries, patent protection exists for new substances and formulations, as well as for unique applications and production processes. However, we do business in regions of the world where intellectual property


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protection may be limited and difficult to enforce. We maintain strict information security policies and procedures wherever we do business. Such information security policies and procedures include data encryption, controls over the disclosure and safekeeping of confidential information, as well as employee awareness training. Moreover, we monitor our competitors and vigorously challenge patent and trademark infringement. For example, Acetyl Intermediates maintains a strict patent enforcement strategy, which has resulted in favorable outcomes in a number of patent infringement matters in Europe, Asia and the United States. We are currently pursuing a number of matters relating to the infringement of our acetic acid patents. Some of our earlier acetic acid patents expired in 2007; other patent applications covering acetic acid are presently pending.
 
Neither our business as a whole nor any particular segment is materially dependent upon any one particular patent, trademark, copyright or trade secret.
 
Trademarks
 
AOPlustm, VAntagetm, VAntage Plustm, BuyTiconaDirecttm, Celanex®, Celcon®, Celstran®, Celvol®, Celvolit®, Compel®, Erkol®, GUR®, Hostaform®, Impet®, Impet-HI®, Mowilith®, Nutrinova®, Riteflex®, Sunett®, Vandar®, Vectra®, Vinamul®, EcoVAEtm, Duroset®,, Acetex® and certain other products and services named in this document are registered trademarks and service marks of Celanese. Fortron® is a registered trademark of Fortron Industries LLC, a venture of Celanese.
 
Environmental and Other Regulation
 
Matters pertaining to environmental and other regulations are discussed in Item 1A. Risk Factors, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Note 16 and Note 23 to the consolidated financial statements.
 
Employees
 
As of December 31, 2008, we had approximately 8,350 employees worldwide from continuing operations, compared to 8,400 as of December 31, 2007. This represents a decrease of less than 1%. The following table sets forth the approximate number of employees on a continuing basis as of December 31, 2008, 2007 and 2006.
 
                         
    Employees as of December 31,  
    2008     2007     2006  
 
North America
    4,100       4,350       4,700  
thereof US
    3,050       3,200       3,300  
thereof Canada
    250       250       500  
thereof Mexico
    800       900       900  
Europe
    3,500       3,500       3,900  
thereof Germany
    1,700       1,700       2,600  
Asia
    700       500       250  
Rest of World
    50       50       50  
                         
Total Employees
    8,350       8,400       8,900  
                         
 
Many of our employees are unionized, particularly in Germany, Canada, Mexico, Brazil, Belgium and France. However, in the United States, less than one quarter of our employees are unionized. Moreover, in Germany and France, wages and general working conditions are often the subject of centrally negotiated collective bargaining agreements. Within the limits established by these agreements, our various subsidiaries negotiate directly with the unions and other labor organizations, such as workers’ councils, representing the employees. Collective bargaining agreements between the German chemical employers associations and unions relating to remuneration generally have a term of one year, while in the United States a three year term for collective bargaining agreements is typical. We offer comprehensive benefit plans for employees and their families and believe our relations with employees are satisfactory.


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Backlog
 
We do not consider backlog to be a significant indicator of the level of future sales activity. In general, we do not manufacture our products against a backlog of orders. Production and inventory levels are based on the level of incoming orders as well as projections of future demand. Therefore, we believe that backlog information is not material to understanding our overall business and should not be considered a reliable indicator of our ability to achieve any particular level of revenue or financial performance.
 
Available Information — Securities and Exchange Commission (“SEC”) Filings and Corporate Governance Materials
 
We make available free of charge, through our internet website (www.celanese.com), our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after electronically filing such material with, or furnishing it to, the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers, including Celanese Corporation, that electronically file with the SEC at http://www.sec.gov.
 
We also make available free of charge, through our internet website, our Corporate Governance Guidelines of our Board of Directors and the charters of each of the committees of the Board. Such materials are also available in print upon the written request of any shareholder to Celanese Corporation, 1601 West LBJ Freeway, Dallas, Texas, 75234-6034, Attention: Investor Relations.
 
Item 1A.   Risk Factors
 
Many factors could have an effect on our financial condition, cash flows and results of operations. We are subject to various risks resulting from changing economic, environmental, political, industry, business and financial conditions. The factors described below represent our principal risks.
 
Risks Related to Our Business
 
The worldwide economic downturn and difficult conditions in the global capital and credit markets have affected and may continue to adversely affect our business, as well as the industries of many of our customers and suppliers, which are cyclical in nature. We do not expect these conditions to improve in the near future.
 
Some of the markets in which our end-use customers participate, such as the automotive, electrical, construction and textile industries, are cyclical in nature, thus posing a risk to us which is beyond our control. These markets are highly competitive, to a large extent driven by end-use markets, and may experience overcapacity, all of which may affect demand for and pricing of our products.
 
Recent declines in consumer and business confidence and spending, together with severe reductions in the availability and cost of credit and volatility in the capital and credit markets, have adversely affected the business and economic environment in which we operate and the profitability of our business. Our business is exposed to risks associated with the creditworthiness of our key suppliers, customers and business partners. In particular, we are exposed to risks associated with the ongoing decline of the automotive, textile and housing markets. These conditions have resulted in financial instability or other adverse effects at many of our suppliers, customers or business partners. The consequences of such adverse effects could include the interruption of production at the facilities of our customers, the reduction, delay or cancellation of customer orders, delays in or the inability of customers to obtain financing to purchase our products, delays or interruptions of the supply of raw materials we purchase and bankruptcy of customers, suppliers or other creditors. Any of these events may adversely affect our cash flow, profitability and financial condition.
 
Moreover, the current worldwide financial crisis has reduced the availability of liquidity and credit to fund or support the continuation and expansion of business operations worldwide. Many lenders and institutional investors have reduced and, in some cases, ceased to provide funding to borrowers. Continued disruption of the credit markets has affected and could continue to adversely affect our customer’s access to credit which supports the continuation


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and expansion of their businesses worldwide and could result in contract cancellations or suspensions, payment delays or defaults by our customers.
 
We are a company with operations around the world and are exposed to general economic, political and regulatory conditions and risks in the countries in which we have significant operations.
 
We operate in the global market and have customers in many countries. We have major facilities primarily located in North America, Europe and Asia, and hold interests in ventures that operate in Germany, China, Japan, South Korea and Saudi Arabia. Our principal customers are similarly global in scope, and the prices of our most significant products are typically world market prices. Consequently, our business and financial results are affected, directly and indirectly, by world economic, political and regulatory conditions.
 
In addition to the worldwide economic downturn, conditions such as the uncertainties associated with war, terrorist activities, epidemics, pandemics or political instability in any of the countries in which we operate could affect us by causing delays or losses in the supply or delivery of raw materials and products, as well as increasing security costs, insurance premiums and other expenses. These conditions could also result in or lengthen economic recession in the United States, Europe, Asia or elsewhere.
 
Moreover, changes in laws or regulations, such as unexpected changes in regulatory requirements (including import or export licensing requirements), or changes in the reporting requirements of the United States, German or European Union (“EU”) governmental agencies, could increase the cost of doing business in these regions. Any of these conditions may have an effect on our business and financial results as a whole and may result in volatile current and future prices for our securities, including our stock.
 
In particular, we have invested significant resources in China and other Asian countries. This region’s growth has slowed and we may fail to realize the anticipated benefits associated with our investment there and our financial results may be adversely impacted.
 
We are subject to risks associated with the increased volatility in the prices and availability of key raw materials and energy.
 
We purchase significant amounts of natural gas, ethylene and methanol from third parties for use in our production of basic chemicals in the Acetyl Intermediates segment, principally formaldehyde, acetic acid and VAM. We use a portion of our output of these chemicals, in turn, as inputs in the production of further products in all our segments. We also purchase significant amounts of wood pulp for use in our production of cellulose acetate in the Consumer Specialties segment. The price of many of these items is dependent on the available supply of such item and may increase significantly as a result of production disruptions or strikes. For example, the unplanned shutdown of our Clear Lake, Texas facility together with other tight supply conditions caused a shortage of acetic acid and increased the price for such product during 2007.
 
We are exposed to any volatility in the prices of our raw materials and energy. Although we have agreements providing for the supply of natural gas, ethylene, wood pulp, electricity and fuel oil, the contractual prices for these raw materials and energy vary with market conditions and may be highly volatile. Factors which have caused volatility in our raw material prices in the past and which may do so in the future include:
 
  •  Shortages of raw materials due to increasing demand, e.g., from growing uses or new uses;
 
  •  Capacity constraints, e.g., due to construction delays, strike action or involuntary shutdowns;
 
  •  The general level of business and economic activity; and
 
  •  The direct or indirect effect of governmental regulation.
 
If we are not able to fully offset the effects of higher energy and raw material costs, or if such commodities were unavailable, it could have a significant adverse effect on our financial results.


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Failure to develop new products and production technologies or to implement productivity and cost reduction initiatives successfully may harm our competitive position.
 
Our operating results, especially in our Consumer Specialties and Advanced Engineered Materials segments, depend significantly on the development of commercially viable new products, product grades and applications, as well as production technologies. If we are unsuccessful in developing new products, applications and production processes in the future, our competitive position and operating results may be negatively affected. Likewise, we have undertaken and are continuing to undertake initiatives in all segments to improve productivity and performance and to generate cost savings. These initiatives may not be completed or beneficial or the estimated cost savings from such activities may not be realized.
 
Recent federal regulations aimed at increasing security at certain chemical production plants and similar legislation that may be proposed in the future could, if passed into law, require us to relocate certain manufacturing activities and require us to alter or discontinue our production of certain chemical products, thereby increasing our operating costs and causing an adverse effect on our results of operations.
 
Regulations have recently been issued by the Department of Homeland Security (“DHS”) aimed at decreasing the risk, and effects, of potential terrorist attacks on chemical plants located within the United States. Pursuant to these regulations, these goals would be accomplished in part through the requirement that certain high-priority facilities develop a prevention, preparedness, and response plan after conducting a vulnerability assessment. In addition, companies may be required to evaluate the possibility of using less dangerous chemicals and technologies as part of their vulnerability assessments and prevention plans and implementing feasible safer technologies in order to minimize potential damage to their facilities from a terrorist attack. We have registered certain of our sites with DHS in accordance with these regulations, and are conducting vulnerability assessments for our sites and until that is done we cannot state with certainty the costs associated with any security plans that DHS may require. These regulations may be revised further, and additional legislation may be proposed in the future on this topic. It is possible that such future legislation could contain terms that are more restrictive than what has recently been passed and which would be more costly to us. We cannot predict the final form of currently pending legislation, or other related legislation that may be passed and can provide no assurance that such legislation will not have an adverse effect on our results of operations in a future reporting period.
 
Environmental regulations and other obligations relating to environmental matters could subject us to liability for fines, clean-ups and other damages, require us to incur significant costs to modify our operations and increase our manufacturing and delivery costs.
 
Costs related to our compliance with environmental laws and regulations, and potential obligations with respect to contaminated sites may have a significant negative impact on our operating results. These include obligations related to sites currently or formerly owned or operated by us, or where waste from our operations was disposed. We also have obligations related to the indemnity agreement contained in the demerger and transfer agreement between Celanese GmbH and Hoechst, also referred to as the demerger agreement, for environmental matters arising out of certain divestitures that took place prior to the demerger.
 
Our operations are subject to extensive international, national, state, local and other supranational laws and regulations that govern environmental and health and safety matters, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”) and the Resource Conservation and Recovery Act of 1976 (“RCRA”). We incur substantial capital and other costs to comply with these requirements. If we violate them, we can be held liable for substantial fines and other sanctions, including limitations on our operations as a result of changes to or revocations of environmental permits involved. Stricter environmental, safety and health laws, regulations and enforcement policies could result in substantial costs and liabilities to us or limitations on our operations and could subject our handling, manufacture, use, reuse or disposal of substances or pollutants to more rigorous scrutiny than at present. Consequently, compliance with these laws and regulations could result in significant capital expenditures as well as other costs and liabilities, which could cause our business and operating results to be less favorable than expected.


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We are also involved in several claims, lawsuits and administrative proceedings relating to environmental matters. An adverse outcome in any of them may negatively affect our earnings and cash flows in a particular reporting period.
 
Changes in environmental, health and safety regulations in the jurisdictions where we manufacture and sell our products could lead to a decrease in demand for our products.
 
New or revised governmental regulations and independent studies relating to the effect of our products on health, safety and the environment may affect demand for our products and the cost of producing our products.
 
Canada recently included vinyl acetate monomer (“VAM”) as one of approximately 200 chemicals being assessed as part of the Canadian Government’s Chemicals Management Plan under the Canadian Environmental Protection Act (“CEPA”). On May 16, 2008, Health Canada published a draft screening risk assessment and draft risk management scope document for VAM that concluded, using a ’precautionary approach’, that VAM be listed as a “toxic substance” under CEPA. On January 27, 2009, after consideration of data submitted by Celanese and other manufacturers and users of VAM and further consideration of a risk assessment prepared by the European Union, Health Canada published its final decision overruling its May 16, 2008 draft assessment of VAM. Health Canada concluded that VAM does not meet the regulatory requirements for being listed as a toxic substance under CEPA.
 
The Registration, Evaluation, Authorization and Restriction of Chemicals (“REACh”), which established a system to register and evaluate chemicals manufactured in, or imported to, the European Union, became effective on June 1, 2007. VAM is one of the chemicals that the European Chemicals Agency (“ECHA”) will regulate under REACh. ECHA will likely rely on the work of the EU-Working group on classification and labeling of dangerous substances. After extensive study, the EU-Working Group agreed that VAM should be classified in the EU as showing limited evidence of a carcinogenic effect. In addition, a risk assessment was performed on VAM by the European Chemicals Bureau of the European Commission. Risk reduction strategies for human health and the environment were finalized without the imposition of any restrictions or burdens atypical to an industrial chemical. The EU-Working Group conclusion has been reviewed and substantively approved by EU Scientific Committee on Health and Environmental Risks.
 
We can provide no assurance that the EU classifications on VAM will not be revised in the future, or that other chemicals we produce will not be classified in a manner that would adversely affect demand for such products. Such negative classifications could have an adverse affect on our business and results of operations.
 
We are a producer of formaldehyde and plastics derived from formaldehyde. Several studies have investigated possible links between formaldehyde exposure and various end points including leukemia. The International Agency for Research on Cancer (“IARC”), a private research agency, has reclassified formaldehyde from Group 2A (probable human carcinogen) to Group 1 (known human carcinogen) based on studies linking formaldehyde exposure to nasopharyngeal cancer, a rare cancer in humans. We expect the results of IARC’s review will be examined and considered by government agencies with responsibility for setting worker and environmental exposure standards and labeling requirements. If such agencies give strong consideration to IARC’s findings in setting such standards and requirements, it could have an adverse effect on our business.
 
Other pending initiatives will potentially require toxicological testing and risk assessments of a wide variety of chemicals, including chemicals used or produced by us. These initiatives include the Voluntary Children’s Chemical Evaluation Program, High Production Volume Chemical Initiative and Chemical Assessment and Management Program (“ChAMP”) in the United States, as well as various European Commission programs, such as REACh.
 
The above-mentioned assessments in the United States, Canada and Europe may result in heightened concerns about the chemicals involved and additional requirements being placed on the production, handling, labeling or use of the subject chemicals. Such concerns and additional requirements could increase the cost incurred by our customers to use our chemical products and otherwise limit the use of these products, which could lead to a decrease in demand for these products. Such a decrease in demand would likely have an adverse impact on our business and results of operations.


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Our production facilities handle the processing of some volatile and hazardous materials that subject us to operating risks that could have a negative effect on our operating results.
 
Our operations are subject to operating risks associated with chemical manufacturing, including the related storage and transportation of raw materials, products and waste. These risks include, among other things, pipeline and storage tank leaks and ruptures, explosions and fires and discharges or releases of toxic or hazardous substances.
 
These operating risks can cause personal injury, property damage and environmental contamination, and may result in the shutdown of affected facilities and the imposition of civil or criminal penalties. The occurrence of any of these events may disrupt production and have a negative effect on the productivity and profitability of a particular manufacturing facility and our operating results and cash flows.
 
Production at our manufacturing facilities could be disrupted for a variety of reasons, which could prevent us from producing enough of our products to maintain our sales and satisfy our customers’ demands.
 
A disruption in production at our manufacturing facilities could have a material adverse effect on our business. Disruptions could occur for many reasons, including fire, natural disasters, weather, unplanned maintenance or other manufacturing problems, disease, strikes, transportation interruption, government regulation or terrorism. Alternative facilities with sufficient capacity or capabilities may not be available, may cost substantially more or may take a significant time to start production, each of which could negatively affect our business and financial performance. If one of our key manufacturing facilities is unable to produce our products for an extended period of time, our sales may be reduced by the shortfall caused by the disruption and we may not be able to meet our customers’ needs, which could cause them to seek other suppliers. For example, during 2007, production was disrupted for an extended period of time at our Clear Lake, Texas facility that produces primarily acetic acid and VAM. The disruption was caused by an unplanned outage of our acetic acid unit. Because of this disruption, the volumes of our Acetyl Intermediates segment were lower than we had expected for 2007 as we were unable to fully offset the lost production. Similar outages could occur in the future from unexpected disruptions at any of our other manufacturing facilities of key products. Such outages could have an adverse effect on our results of operations in future reporting periods.
 
We may experience unexpected difficulties in the relocation of our Ticona plant from Kelsterbach to the Rhine Main area, which may increase our costs, delay the transition or disrupt our ability to supply our customers.
 
We have agreed with Frankfurt, Germany Airport (“Fraport”) to relocate our Kelsterbach, Germany business, resolving several years of legal disputes related to the planned Frankfurt airport expansion. As a result of the settlement, we will transition Ticona’s operations from Kelsterbach to another location in Germany by mid-2011. In July 2007, we announced that we would relocate the Kelsterbach, Germany business to the Hoechst Industrial Park in the Rhine Main area. Over a five-year period, Fraport agreed to pay Ticona a total of €670 million to offset the costs associated with the transition of the business from its current location and the closure of the Kelsterbach plant. While the settlement and related payment amount are meant to be cost-neutral and represent the actual amount we will require to select a site, build new production facilities, demolish old production facilities and transition business activities according to schedule and without any disruptions to customer supply, we may encounter unexpected costs or other difficulties during the relocation process that bring the total costs of the relocation to an amount greater than the compensation provided by Fraport. The relocation of these facilities represents a major logistical undertaking, and we may have underestimated the amount that will be required to carry out every aspect of the relocation. We may lose the services of valuable experienced employees during the transition if they decide not to work at the new location. The construction of the new facilities may not be complete on time or may face cost overruns. If our costs relating to the relocation exceed the amount of payments from Fraport or if the relocation causes other unexpected difficulties, our expenses may increase or supplies to our customers may be disrupted.
 
If supply to our customers is disrupted for an extended period, this could negatively impact the reputation of this business and result in the loss of customers. Such effects could have an adverse impact on our results of operations in future periods.


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Our significant non-US operations expose us to global exchange rate fluctuations that could adversely impact our profitability.
 
As we conduct a significant portion of our operations outside the United States, fluctuations in currencies of other countries, especially the Euro, may materially affect our operating results. For example, changes in currency exchange rates may decrease our profits in comparison to the profits of our competitors on the same products sold in the same markets and increase the cost of items required in our operations.
 
A substantial portion of our net sales is denominated in currencies other than the US dollar. In our consolidated financial statements, we translate our local currency financial results into US dollars based on average exchange rates prevailing during a reporting period or the exchange rate at the end of that period. During times of a strengthening US dollar our reported international sales, earnings, assets and liabilities will be reduced because the local currency will translate into fewer US dollars.
 
In addition to currency translation risks, we incur a currency transaction risk whenever one of our operating subsidiaries enters into either a purchase or a sales transaction using a currency different from the operating subsidiary’s functional currency. Given the volatility of exchange rates, we may not be able to manage our currency transaction and translation risks effectively, and volatility in currency exchange rates may expose our financial condition or results of operations to a significant additional risk. Since a portion of our indebtedness is and will be denominated in currencies other than US dollars, a weakening of the US dollar could make it more difficult for us to repay our indebtedness.
 
We use financial instruments to hedge our exposure to foreign currency fluctuations, but we cannot guarantee that our hedging strategies will be effective. Failure to effectively manage these risks could have an adverse impact on our financial position, results of operations and cash flows.
 
Significant changes in pension fund investment performance or assumptions relating to pension costs may have a material effect on the valuation of pension obligations, the funded status of pension plans and our pension cost.
 
The cost of our pension plans is incurred over long periods of time and involve many uncertainties during those periods of time. Our funding policy for pension plans is to accumulate plan assets that, over the long run, will approximate the present value of projected benefit obligations. Our pension cost is materially affected by the discount rate used to measure pension obligations, the level of plan assets available to fund those obligations at the measurement date and the expected long-term rate of return on plan assets. Significant changes in investment performance or a change in the portfolio mix of invested assets can result in corresponding increases and decreases in the valuation of plan assets, particularly equity securities, or in a change of the expected rate of return on plan assets. During the previous fiscal year, the value of our plan assets declined significantly due to the decline in the overall equity markets. A change in the discount rate would result in a significant increase or decrease in the valuation of pension obligations, affecting the reported funded status of our pension plans as well as the net periodic pension cost in the following fiscal years. In recent years, an extended duration strategy in the asset portfolio has been implemented to minimize the influence of liability volatility due to interest rate movements. Similarly, changes in the expected return on plan assets can result in significant changes in the net periodic pension cost for subsequent fiscal years. If the value of our pension fund’s portfolio declines or does not perform as expected or if our experience with the fund leads us to change our assumptions regarding the fund, we may be required to contribute additional capital to the fund.
 
Our future success will depend in part on our ability to protect our intellectual property rights. Our inability to enforce these rights could reduce our ability to maintain our market position and our profit margins.
 
We attach great importance to patents, trademarks, copyrights and product designs in order to protect our investment in research and development, manufacturing and marketing. Our policy is to seek the widest possible protection for significant product and process developments in our major markets. Patents may cover products, processes, intermediate products and product uses. Protection for individual products extends for varying periods in accordance with the date of patent application filing and the legal life of patents in the various countries. The protection afforded, which may also vary from country to country, depends upon the type of patent and its scope of


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coverage. As patents expire, the products and processes described and claimed in those patents become generally available for use by the public. We also seek to register trademarks extensively as a means of protecting the brand names of our products, which brand names become more important once the corresponding patents have expired. Our continued growth strategy may bring us to regions of the world where intellectual property protection may be limited and difficult to enforce. If we are not successful in protecting our trademark or patent rights, our revenues, results of operations and cash flows may be adversely affected.
 
Provisions in our second amended and restated certificate of incorporation and second amended and restated bylaws, as well as any shareholders’ rights plan, may discourage a takeover attempt.
 
Provisions contained in our second amended and restated certificate of incorporation and bylaws could make it more difficult for a third party to acquire us, even if doing so might be beneficial to our shareholders. Provisions of our second amended and restated certificate of incorporation and bylaws impose various procedural and other requirements, which could make it more difficult for shareholders to effect certain corporate actions. For example, our second amended and restated certificate of incorporation authorizes our Board of Directors to determine the rights, preferences, privileges and restrictions of unissued series of preferred stock, without any vote or action by our shareholders. Thus, our Board of Directors can authorize and issue shares of preferred stock with voting or conversion rights that could adversely affect the voting or other rights of holders of our Series A common stock. These rights may have the effect of delaying or deterring a change of control of our company. In addition, a change of control of our company may be delayed or deterred as a result of our having three classes of directors (each class elected for a three year term) or as a result of any shareholders’ rights plan that our Board of Directors may adopt. These provisions could limit the price that certain investors might be willing to pay in the future for shares of our Series A common stock.
 
Risks Related to the Acquisition of Celanese GmbH, formerly Celanese AG
 
The amounts of the fair cash compensation and of the guaranteed annual payment offered under the domination and profit and loss transfer agreement (“Domination Agreement”) may be increased, which may further reduce the funds the Purchaser can otherwise make available to us.
 
Several minority shareholders of Celanese GmbH have 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. On March 14, 2005, the Frankfurt District Court dismissed on grounds of inadmissibility the motions of all minority shareholders regarding the initiation of these special award proceedings. In January 2006, the Frankfurt Higher District Court ruled that the appeals were admissible, and the proceedings will therefore continue. On December 12, 2006, the Frankfurt District Court appointed an expert to help determine the value of Celanese GmbH. As a result of these proceedings, the amounts of the fair cash compensation and of the guaranteed annual payment could be increased by the court, and the Purchaser would be required to make such payments within two months after the publication of the court’s ruling. Any such increase may be substantial. All minority shareholders would be entitled to claim the respective higher amounts. This may reduce the funds the Purchaser can make available to us and, accordingly, diminish our ability to make payments on our indebtedness. See Note 23 to the consolidated financial statements for further information.
 
The Purchaser may be required to compensate Celanese GmbH for annual losses, which may reduce the funds the Purchaser can otherwise make available to us.
 
Under the Domination Agreement, the Purchaser is required, among other things, to compensate Celanese GmbH for any annual loss incurred, determined in accordance with German accounting requirements, by Celanese GmbH at the end of the fiscal year in which the loss was incurred. This obligation to compensate Celanese GmbH for annual losses will apply during the entire term of the Domination Agreement. If Celanese GmbH incurs losses during any period of the operative term of the Domination Agreement and if such losses lead to an annual loss of Celanese GmbH at the end of any given fiscal year during the term of the Domination Agreement, the Purchaser will be obligated to make a corresponding cash payment to Celanese GmbH to the extent that the respective annual loss is not fully compensated for by the dissolution of profit reserves accrued at the level of Celanese GmbH during the term of the Domination Agreement. The Purchaser may be able to reduce or avoid cash payments to Celanese GmbH by off-setting against such loss compensation claims by Celanese GmbH any valuable counterclaims against


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Celanese GmbH that the Purchaser may have. If the Purchaser is obligated to make cash payments to Celanese GmbH to cover an annual loss, we may not have sufficient funds to make payments on our indebtedness when due and, unless the Purchaser is able to obtain funds from a source other than annual profits of Celanese GmbH, the Purchaser may not be able to satisfy its obligation to fund such shortfall. See Note 23 to the consolidated financial statements.
 
We and two of our subsidiaries have taken on certain obligations with respect to the Purchaser’s obligation under the Domination Agreement and intercompany indebtedness to Celanese GmbH, which may diminish our ability to make payments on our indebtedness.
 
Our 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 so that the Purchaser is at all times in a position to completely meet its obligations under, or in connection with, the Domination Agreement. In addition, Celanese has guaranteed (i) that the Purchaser will meet its obligation under the Domination Agreement to compensate Celanese GmbH for any annual loss incurred by Celanese GmbH during the term of the Domination Agreement; and (ii) the repayment of all existing intercompany indebtedness of Celanese’s subsidiaries to Celanese GmbH. Further, under the terms of Celanese’s guarantee, in certain limited circumstances Celanese GmbH may be entitled to require the immediate repayment of some or all of the intercompany indebtedness owed by Celanese’s subsidiaries to Celanese GmbH. If CIH and/or Celanese US are obligated to make payments under their obligations to the Purchaser or Celanese GmbH, as the case may be, or if the intercompany indebtedness owed to Celanese GmbH is accelerated, we may not have sufficient funds for payments on our indebtedness when due.
 
Risks Related to Our Indebtedness
 
See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Liquidity — Contractual Obligations.”
 
Our level of indebtedness could diminish our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or the chemicals industry and prevent us from meeting obligations under our indebtedness.
 
Our total indebtedness is approximately $3.5 billion as of December 31, 2008.
 
Our debt could have important consequences, including:
 
  •  increasing vulnerability to general economic and industry conditions including exacerbating any adverse business effects that are determined to be material adverse effects under our senior credit facility;
 
  •  requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on indebtedness, therefore reducing our ability to use our cash flow to fund operations, capital expenditures and future business opportunities;
 
  •  exposing us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest;
 
  •  limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions and general corporate or other purposes; and
 
  •  limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who have less debt.
 
A breach of a covenant or other provision in any debt instrument governing our current or future indebtedness could result in a default under that instrument and, due to cross-default provisions, could result in a default under our senior credit facility. Upon the occurrence of an event of default under the senior credit facility, the lenders could elect to declare all amounts outstanding to be immediately due and payable and terminate all commitments to extend further credit. If we were unable to repay those amounts, the lenders could proceed against the collateral, if any, granted to them to secure the indebtedness. If the lenders under the senior credit facility were to accelerate the payment of the indebtedness, there is no guarantee that our assets or cash flow would be sufficient to repay in full our outstanding indebtedness.


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Moreover, the terms of our existing debt do not fully prohibit us or our subsidiaries from incurring substantial additional indebtedness in the future. If new debt, including amounts available under our senior credit agreement, is added to our current debt levels, the related risks that we now face could intensify. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Liquidity — Contractual Obligations.”
 
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly and affect our operating results.
 
Certain of our borrowings are at variable rates of interest and expose us to interest rate risk. If interest rates were to increase, our debt service obligations on our variable rate indebtedness would increase, net of the impacts of hedges in place. In April 2007, we, through certain of our subsidiaries, entered into a senior credit agreement. The new senior credit agreement consists of $2,280 million of US dollar denominated and €400 million of Euro denominated term loans due 2014, a $650 million revolving credit facility terminating in 2013 and a $228 million credit-linked revolving facility terminating in 2014. Borrowings under the new 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 new senior credit agreement. The term loans under the new senior credit agreement are subject to amortization at 1% of the initial principal amount per annum, payable quarterly, commencing in July 2007. The remaining principal amount of the term loans will be due on April 2, 2014.
 
An increase in interest rates could have an adverse impact on our future results of operations and cash flows. See also “Quantitative and Qualitative Disclosures About Market Risk — Interest Rate Risk Management.”
 
We may not be able to generate sufficient cash to service our indebtedness, and may be forced to take other actions to satisfy obligations under our indebtedness, which may not be successful.
 
Our ability to satisfy our cash needs depends on cash on hand, receipt of additional capital, including possible additional borrowings, and receipt of cash from our subsidiaries by way of distributions, advances or cash payments.
 
Our ability to make scheduled payments on or to refinance our debt obligations depends on the financial condition and operating performance of our subsidiaries, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.
 
If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. The senior credit agreement governing our indebtedness restricts our ability to dispose of assets and use the proceeds from the disposition. We may not be able to consummate those dispositions or to obtain the proceeds which we could realize from them and these proceeds may not be adequate to meet any debt service obligations then due.
 
Restrictive covenants in our debt instruments may limit our ability to engage in certain transactions and may diminish our ability to make payments on our indebtedness.
 
The senior credit agreement governing our indebtedness contains various covenants that limit our ability to engage in specified types of transactions. The covenants contained in the senior credit agreement limit our ability to, among other things, incur additional indebtedness, pay dividends on or make other distributions on or repurchase capital stock or make other restricted payments, make investments and sell certain assets. Such restrictions in our debt instruments could result in us having to obtain the consent of our lenders in order to take certain actions. Recent disruptions in credit markets may prevent us from or make it more difficult or more costly for us to obtain such


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consents from our lenders. Our ability to expand our business or to address declines in our business may be limited if we are unable to obtain such consents.
 
In addition, the senior credit agreement requires us to maintain a maximum first lien senior secured leverage ratio no greater than 3.90 to 1.00 if there are outstanding borrowings under the revolving credit facility. Our ability to meet this financial ratio can be affected by events beyond our control, and we may not be able to meet this test at all.
 
A breach of any of these covenants could result in a default under the senior credit agreement. Upon the occurrence of an event of default under the senior credit agreement, the lenders could elect to declare all amounts outstanding under the senior credit agreement to be immediately due and payable and terminate all commitments to extend further credit. If we were unable to repay those amounts, the lenders under the senior credit agreement could proceed against the collateral granted to them to secure that indebtedness. Our subsidiaries have pledged a significant portion of our assets as collateral under the senior credit agreement. If the lenders under the senior credit agreement accelerate the repayment of borrowings, we may not have sufficient assets to repay amounts borrowed under the senior credit agreement as well as their other indebtedness, which could have a material adverse effect on the value of our stock.
 
The terms of our senior credit agreement limit the ability of BCP Crystal and its subsidiaries to pay dividends or otherwise transfer their assets to us.
 
Our operations are conducted through our subsidiaries and our ability to pay dividends is dependent on the earnings and the distribution of funds from our subsidiaries. However, the terms of our senior credit agreement limit the ability of BCP Crystal and its subsidiaries to pay dividends or otherwise transfer their assets to us. Accordingly, our ability to pay dividends on our stock is similarly limited.
 
Item 1B.   Unresolved Staff Comments
 
None.


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Item 2.   Properties
 
Description of Property
 
As of December 31, 2008, we had numerous production and manufacturing facilities throughout the world. We also own or lease other properties, including office buildings, warehouses, pipelines, research and development facilities and sales offices. We continuously review and evaluate our facilities as a part of our strategy to optimize our business portfolio. The following table sets forth a list of our principal production and other facilities throughout the world as of December 31, 2008.
 
         
Site
 
Leased/Owned
 
Products/Functions
 
Corporate Offices
       
Budapest, Hungary
  Leased   Administrative offices
Dallas, Texas, US
  Leased   Corporate headquarters
Kronberg/Taunus, Germany
  Leased   Administrative offices
Mexico City, Mexico
  Leased   Administrative offices
Mexico City, Mexico(1)
  Owned   Administrative offices
Advanced Engineered Materials
       
Auburn Hills, Michigan, US
  Leased   Automotive Development Center
Bishop, Texas, US
  Owned   POM, GUR®, Compounding
Florence, Kentucky, US
  Owned   Compounding
Kelsterbach, Germany
  Owned   LFRT, POM, Compounding
Oberhausen, Germany(5)
  Leased   GUR®
Fuji City, Japan
  Venture owned by Polyplastics Co., Ltd., a cost method investment   POM, PBT, LCP, Compounding
Kuantan, Malaysia
  Venture owned by Polyplastics Co., Ltd., a cost method investment   POM, Compounding
Shelby, North Carolina, US
  Owned   LCP, PBT, PET, Compounding
Suzano, Brazil
  Owned   Compounding
Ulsan, South Korea
  Venture owned by Korea Engineering Plastics Co., Ltd., an equity method investment   POM
Wilmington, North Carolina, US
  Venture owned by Fortron Industries LLC, an equity method investment   PPS
Winona, Minnesota, US
  Owned   LFRT
Nanjing, China(3)
  Leased   GUR®
Consumer Specialties
       
Kunming, China
  Venture owned by Kunming Cellulose Fibers Co. Ltd., a cost method investment   Acetate tow, Acetate flake
Lanaken, Belgium
  Owned   Acetate tow
Nantong, China
  Venture owned by Nantong Cellulose Fibers Co. Ltd., a cost method investment   Acetate tow, Acetate flake
Narrows, Virginia, US
  Owned   Acetate tow, Acetate flake
Ocotlán, Jalisco, Mexico
  Owned   Acetate tow, Acetate flake
Spondon, Derby, UK
  Owned   Acetate tow, Acetate flake
Frankfurt am Main, Germany(4)
  Venture owned by InfraServ GmbH & Co. Hoechst KG, an equity method investment   Sorbates, Sunett® sweetener
Zhuhai, China
  Venture owned by Zhuhai Cellulose Fibers Co. Ltd., a cost method investment   Acetate tow, Acetate flake
Industrial Specialties
       
Boucherville, Quebec, Canada
  Owned   Conventional emulsions


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Site
 
Leased/Owned
 
Products/Functions
 
Calvert City, Kentucky, US(5)
  Leased   PVOH
Enoree, South Carolina, US
  Owned   Conventional emulsions, Vinyl acetate ethylene emulsions
Edmonton, Alberta, Canada
  Owned   LDPE, EVA
Frankfurt am Main, Germany(4)
  Venture owned by InfraServ GmbH & Co. Hoechst KG, an equity method investment   Conventional emulsions, Vinyl acetate ethylene emulsions
Geleen, Netherlands
  Owned   Vinyl acetate ethylene emulsions
Guardo, Spain(6)
  Owned   PVOH, Polyvinyl acetate
Meredosia, Illinois, US
  Owned   Conventional emulsions, Vinyl acetate ethylene emulsions
Nanjing, China(3)
  Leased   Conventional emulsions, Vinyl acetate ethylene emulsions
Pasadena, Texas, US(5)
  Leased   PVOH
Koper, Slovenia(6)
  Owned   Conventional emulsions
Tarragona, Spain(2)
  Venture owned by Complejo Industrial Taqsa AIE, a cost method investment   Conventional emulsions, Vinyl acetate ethylene emulsions, PVOH
Perstorp, Sweden
  Owned   Conventional emulsions, Vinyl acetate ethylene emulsions
Warrington, UK(6)
  Owned   Conventional emulsions, Vinyl acetate ethylene emulsions
Acetyl Intermediates
       
Bay City, Texas, US
  Leased   VAM
Bishop, Texas, US
  Owned   Formaldehyde
Cangrejera, Veracruz, Mexico(7)
  Owned   Acetic anhydride, Ethyl acetate, VAM
Clear Lake, Texas, US
  Owned   Acetic acid, VAM
Frankfurt am Main, Germany(4)
  Venture owned by InfraServ GmbH & Co. Hoechst KG, an equity method investment   Acetaldehyde, VAM, Butyl acetate
Nanjing, China(3)
  Leased   Acetic acid, Acetic anhydride
Pampa, Texas, US(6)
  Owned   Acetic acid, Acetic anhydride, Ethyl acetate
Pardies, France
  Owned   Acetic acid, VAM
Roussillon, France(5)
  Leased   Acetic anhydride
Jubail, Saudi Arabia
  Venture owned by National Methanol Company (Ibn Sina), a cost method investment   Methyl tertiary-butyl ether, Methanol
Jurong Island, Singapore(5)
  Leased   Acetic acid, Butyl acetate, Ethyl acetate, VAM
Tarragona, Spain(2)
  Venture owned by Complejo Industrial Taqsa AIE, a cost method investment   VAM
 
 
(1) Site is no longer operational and is currently held for sale.
 
(2) Multiple Celanese business segments conduct operations at the Tarragona facility. Celanese owns its assets at the facility but shares ownership in the land. Celanese’s ownership percentage in the land is 15%.

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(3) Multiple Celanese business segments conduct operations at the Nanjing facility. Celanese owns the assets on this site, but utilizes the land through the terms of a long-term land lease.
 
(4) Multiple Celanese business segments conduct operations at the Frankfurt facility.
 
(5) Celanese owns the assets on this site, but utilizes the land through the terms of a long-term land lease.
 
(6) Site is no longer operating as of December 31, 2008.
 
(7) The Company has announced its decision to shut down the Cangrejera VAM production unit effective at the end of February 2009.
 
We believe that our current facilities are adequate to meet the requirements of our present and foreseeable future operations. We continue to review our capacity requirements as part of our strategy to maximize our global manufacturing efficiency.
 
See Note 8 to the consolidated financial statements for more information on our cost and equity method investments.
 
For information on environmental issues associated with our properties, see “Business — Environmental and Other Regulation” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Environmental Matters.” Additional information with respect to our property, plant and equipment, and leases is contained in Note 9 and Note 21 to the consolidated financial statements.
 
Item 3.   Legal Proceedings
 
We are involved in a number of legal proceedings, lawsuits and claims incidental to the normal conduct of our 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, we believe, based on the advice of legal counsel, that adequate provisions have been made and that the ultimate outcomes will not have a material adverse effect on our financial position, but may have a material adverse effect on our results of operations or cash flows in any given accounting period. See Note 23 to the consolidated financial statements for a discussion of legal proceedings.
 
Item 4.   Submission of Matters to a Vote of Security Holders
 
No matters were submitted to a vote of security holders during the fourth quarter of 2008.


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PART II
 
Item 5.   Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
Market Information
 
Our Series A common stock has traded on the New York Stock Exchange under the symbol “CE” since January 21, 2005. The closing sale price of our Series A common stock, as reported by the New York Stock Exchange, on February 6, 2009 was $11.92. The following table sets forth the high and low intraday sales prices per share of our common stock, as reported by the New York Stock Exchange, for the periods indicated.
 
                 
    Price Range  
    High     Low  
 
2008
               
Quarter ended March 31, 2008
  $ 43.72     $ 31.76  
Quarter ended June 30, 2008
  $ 50.99     $ 39.50  
Quarter ended September 30, 2008
  $ 47.02     $ 24.68  
Quarter ended December 31, 2008
  $ 27.76     $ 5.71  
2007
               
Quarter ended March 31, 2007
  $ 32.00     $ 24.50  
Quarter ended June 30, 2007
  $ 39.43     $ 30.59  
Quarter ended September 30, 2007
  $ 42.49     $ 30.70  
Quarter ended December 31, 2007
  $ 44.77     $ 35.16  
 
Holders
 
No shares of Celanese’s Series B common stock are issued and outstanding. As of February 6, 2009, there were 72 holders of record of our Series A common stock, and one holder of record of our perpetual preferred stock. By including persons holding shares in broker accounts under street names, however, we estimate our shareholder base to be approximately 56,000 as of February 6, 2009.
 
Dividend Policy
 
Our Board of Directors adopted a policy of declaring, subject to legally available funds, a quarterly cash dividend on each share of our Series A common stock at an annual rate of $0.16 per share unless our Board of Directors, in its sole discretion, determines otherwise. Pursuant to this policy, we paid quarterly dividends of $0.04 per share on February 1, 2008, May 1, 2008, August 1, 2008 and November 1, 2008 and similar quarterly dividends during each quarter of 2007. The annual cash dividend declared and paid during the years ended December 31, 2008 and 2007 were $24 million and $25 million, respectively. Dividends payable to holders of our Series A common stock cannot be declared or paid nor can any funds be set aside for the payment thereof, unless we have paid or set aside funds for the payment of all accumulated and unpaid dividends with respect to the shares of our preferred stock, as described below. Our Board of Directors may, at any time, modify or revoke our dividend policy on our Series A common stock.
 
We are required under the terms of the preferred stock to pay scheduled quarterly dividends, subject to legally available funds. For so long as the preferred stock remains outstanding, (1) we will not declare, pay or set apart funds for the payment of any dividend or other distribution with respect to any junior stock or parity stock and (2) neither we, nor any of our subsidiaries, will, subject to certain exceptions, redeem, purchase or otherwise acquire for consideration junior stock or parity stock through a sinking fund or otherwise, in each case unless we have paid or set apart funds for the payment of all accumulated and unpaid dividends with respect to the shares of preferred stock and any parity stock for all preceding dividend periods. Pursuant to this policy, we paid quarterly dividends of $0.265625 per share on our 4.25% convertible perpetual preferred stock on February 1, 2008, May 1, 2008, August 1, 2008 and November 1, 2008 and similar quarterly dividends during each quarter of 2007.


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On January 5, 2009, we declared a cash dividend of $0.265625 per share on our 4.25% convertible perpetual preferred stock amounting to $3 million and a cash dividend of $0.04 per share on its Series A common stock amounting to $6 million. Both cash dividends are for the period November 1, 2008 to January 31, 2009 and were paid on February 1, 2009 to holders of record as of January 15, 2009.
 
Based on the number of outstanding shares as of December 31, 2008, the cash dividends to be paid in 2009 are expected to result in annual dividend payments similar to that paid in 2008.
 
The amount available to us to pay cash dividends is restricted by our senior credit agreement. Any decision to declare and pay dividends in the future will be made at the discretion of our Board of Directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our Board of Directors may deem relevant.
 
Celanese Purchases of its Equity Securities
 
The table below sets forth information regarding repurchases of our Series A common stock during the three months ended December 31, 2008:
 
                                 
                      Approximate Dollar
 
                Total Number of
    Value of Shares
 
    Total Number
    Average
    Shares Purchased as
    Remaining that may be
 
    of Shares
    Price Paid
    Part of Publicly
    Purchased Under
 
Period
  Purchased(1)     per Share     Announced Program     the Program  
 
October 1, 2008
    44,221     $ 26.71           $ 122,300,000  
 
 
(1) Relates to shares employees have elected to have withheld to cover their minimum withholding requirements for personal income taxes related to the vesting of restricted stock units. No shares were purchased during the three months ended December 31, 2008 under our previously announced stock repurchase plan.


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Performance Graph
 
The following Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing.
 
Comparison of Cumulative Total Return
 
(PERFORMANCE GRAPH)


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Equity Compensation Plans
 
Securities Authorized for Issuance Under Equity Compensation Plans
 
The following information is provided as of December 31, 2008 with respect to equity compensation plans:
 
                         
                Number of Securities
 
                Remaining Available for
 
    Number of Securities to be
    Weighted Average
    Future Issuance Under
 
    Issued upon Exercise of
    Exercise Price of
    Equity Compensation
 
    Outstanding Options,
    Outstanding Options,
    Plans (excluding securities
 
Plan Category
  Warrants and Rights     Warrants and Rights     reflected in column (a))  
    (a)     (b)     (c)  
 
Equity compensation plans approved by security holders
                 
Equity compensation plans not approved by security holders: 
                       
Stock options
    7,015,759     $ 19.35       285,517  
Restricted stock units
    1,603,766             285,517  
                         
Total
    8,619,525               285,517  
 
Recent Sales of Unregistered Securities
 
In December 2007, we adopted a deferred compensation plan whereby we offered certain of our senior employees and directors the opportunity to defer a portion of their compensation in exchange for a future payment amount equal to their deferments plus or minus certain amounts based upon the market-performance of specified measurement funds selected by the participant. These deferred compensation obligations may be considered securities of Celanese. Participants were required to make deferral elections under the plan prior to January 1 of the year such deferrals will be withheld from their compensation. We relied on the exemption from registration provided by Section 4(2) of the Securities Act in making this offer to a select group of employees, fewer than 35 of which were non-accredited investors under the rules promulgated by the Commission.
 
Item 6.   Selected Financial Data
 
The balance sheet data shown below as of December 31, 2008 and 2007, and the statements of operations and cash flow data for the years ended December 31, 2008, 2007 and 2006, all of which are set forth below, are derived from the consolidated financial statements included elsewhere in this document and should be read in conjunction with those financial statements and the notes thereto. The balance sheet data as of December 31, 2006, 2005 and 2004 and as of March 31, 2004 and the statements of operations and cash flow data for the year ended December 31, 2005, the nine months ended December 31, 2004 and the three months ended March 31, 2004 shown below were derived from previously issued financial statements, adjusted for applicable discontinued operations.
 
The balance sheet, statement of operations and cash flow data for periods prior to April 1, 2004 in the tables below represent the results of the Predecessor, which refers to Celanese GmbH, formerly known as Celanese AG, and its consolidated subsidiaries. The balance sheet, statement of operations and cash flow data for periods subsequent to April 1, 2004 in the tables below represent the results of the Successor, which refers to Celanese Corporation and its consolidated subsidiaries. The results of the Successor are not comparable to the results of the Predecessor due to the difference in the basis of presentation of purchase accounting as compared to historical cost. Furthermore, the Successor and the Predecessor have different accounting policies with respect to certain matters.


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    Successor       Predecessor  
                            Nine Months
      Three Months
 
                            Ended
      Ended
 
    Year Ended December 31,     December 31,
      March 31,
 
    2008     2007     2006     2005     2004       2004  
    (In $ millions, except per share data)  
Statement of Operations Data:
                                                 
Net sales
    6,823       6,444       5,778       5,270       3,206         1,058  
Other (charges) gains, net
    (108 )     (58 )     (10 )     (61 )     (78 )       (28 )
Operating profit
    440       748       620       486       17         39  
Earnings (loss) from continuing operations before tax and minority interests
    434       447       526       276       (230 )       62  
Earnings (loss) from continuing operations
    372       336       319       214       (292 )       48  
Earnings (loss) from discontinued operations
    (90 )     90       87       63       39         30  
Net earnings (loss)
    282       426       406       277       (253 )       78  
Earnings (loss) per share from continuing operations — basic
    2.44       2.11       1.95       1.32       (2.94 )       0.97  
Earnings (loss) per share from continuing operations — diluted
    2.28       1.96       1.86       1.29       (2.94 )       0.97  
Statement of Cash Flows Data:
                                                 
Net cash provided by (used in):
                                                 
Operating activities
    586       566       751       701       (62 )       (102 )
Investing activities
    (201 )     143       (268 )     (907 )     (1,811 )       91  
Financing activities
    (499 )     (714 )     (108 )     (144 )     2,686         (43 )
Balance Sheet Data (at the end of period):
                                                 
Trade working capital(1)
    685       827       824       758       743         689  
Total assets
    7,166       8,058       7,895       7,445       7,410         6,613  
Total debt
    3,533       3,556       3,498       3,437       3,387         587  
Shareholders’ equity (deficit)
    182       1,062       787       235       (112 )       2,622  
Other Financial Data:
                                                 
Depreciation and amortization
    350       291       269       267       165         64  
Capital expenditures(3)
    267       306       244       203       134         29  
Cash basis dividends paid per common share(2)
    0.16       0.16       0.16       0.08               —   
 
 
(1) Trade working capital is defined as trade accounts receivable from third parties and affiliates net of allowance for doubtful accounts, plus inventories, less trade accounts payable to third parties and affiliates. Trade working capital is calculated in the table below:
 
                                                             
      Successor       Predecessor  
      As of December 31,       March 31,
 
      2008       2007       2006       2005       2004       2004  
      (In $ millions)  
Trade receivables, net
      631         1,009         1,001         919         866         810  
Inventories
      577         636         653         650         603         491  
Trade payables
      (523 )       (818 )       (830 )       (811 )       (726 )       (612 )
                                                             
Trade working capital
      685         827         824         758         743         689  
                                                             
 
(2) In the nine months ended December 31, 2004, Celanese GmbH declared and paid a dividend of €0.12 ($0.14) per share for the year ended December 31, 2003. Dividends paid to Celanese and its consolidated subsidiaries eliminate in consolidation.
 
(3) Amounts include accrued capital expenditures. Amounts do not include capital expenditures related to capital lease obligations or capital expenditures related to the relocation of our Ticona plant in Kelsterbach. See Note 24 and Note 28 to the consolidated financial statements.


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Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
In this Annual Report on Form 10-K, 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.
 
You should read the following discussion and analysis of the financial condition and the results of operations together with the consolidated financial statements and the accompanying notes to the consolidated financial statements, which were prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).
 
Investors are cautioned that the forward-looking statements contained in this section involve both risk and uncertainty. Several important factors could cause actual results to differ materially from those anticipated by these statements. Many of these statements are macroeconomic in nature and are, therefore, beyond the control of management. See “Forward-Looking Statements May Prove Inaccurate” below.
 
Reconciliation of Non-US GAAP Measures:  We believe that using non-US GAAP financial measures to supplement US GAAP results is useful to investors because such use provides a more complete understanding of the factors and trends affecting the business other than disclosing US GAAP results alone. In this regard, we disclose net debt, which is a non-US GAAP financial measure. Net debt is defined as total debt less cash and cash equivalents. We use net debt to evaluate the capital structure. Net debt is not a substitute for any US GAAP financial measure. In addition, calculations of net debt contained in this report may not be consistent with that of other companies. The most directly comparable financial measure presented in accordance with US GAAP in our financial statements for net debt is total debt. For a reconciliation of net debt to total debt, see “Financial Highlights” below.
 
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 Annual Report 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. 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 1, Item 1A 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;


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  •  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;
 
  •  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 document.
 
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 Annual 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
 
During 2008, we made significant strides in strengthening our competitive position. As detailed below, we advanced our expansion efforts in Asia, successfully generated cash and used it to deliver value for our shareholders, settled legacy litigation matters, carried out our sustainability commitments and fulfilled our role as a responsible corporate citizen.
 
2008 Highlights:
 
  •  Opened a customer application development center in Shanghai, China, to support growth in the region for Advanced Engineered Materials’ engineering polymers business.
 
  •  Our Board of Directors authorized us to repurchase up to $500 million of our Series A common stock. During the year ended December 31, 2008, we repurchased 9,763,200 shares of our Series A common stock for $378 million pursuant to this authorization.
 
  •  Signed an agreement to establish a 20,000 square-meter integrated technology and marketing facility in Shanghai, China. The facility will combine the headquarters for our Asia businesses, customer application development and research and development center.
 
  •  Successfully started up our newly constructed 20,000 ton ultra-high molecular weight polyethylene (“GUR®”) facility, 100,000 ton acetic anhydride facility and 300,000 ton vinyl acetate monomer (“VAM”) facility, all located at our integrated chemical complex in Nanjing, China.
 
  •  Our Nutrinova business and BRAIN AG, a leading European “white” biotech company, identified all-natural compounds for high intensity sweeteners and sweetness enhancers.
 
  •  Introduced EcoVAEtm, a new vinyl acetate/ethylene emulsion technology designed to facilitate the manufacture of high quality, eco-friendly paints for North America and Asia.
 
  •  Resolved certain legacy litigation matters by entering into a settlement agreement for $107 million related to sales by the polyester staple fibers business, which Hoechst AG sold to KoSa, Inc. in 1998. In addition, we paid €17 million to settle Sorbates antitrust actions with the European Commission.


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  •  Announced plans to build a new Vectra® liquid crystal polymer (“LCP”) production facility co-located at our integrated chemical complex in Nanjing, China. Construction for the LCP production facility and start-up dates will depend on market conditions.
 
  •  Began construction of the world’s largest polyacetal plant in Hoechst Industrial Park. The state-of-the-art facility is expected to be operational in 2011 and will replace Ticona’s existing production operations in Kelsterbach, Germany.
 
  •  Received Green Partner certification from Sony Corporation at our Ticona plant in Shelby, North Carolina. The certification recognizes suppliers’ cooperation of eco-friendly products and their ability to meet established regulations for environment-related substances found in components of products that bear the Sony name.
 
  •  Announced the shutdown of the VAM production unit in Cangrejera, Mexico and the assessment of the potential closure of acetic acid and vinyl acetate monomer (“VAM”) production in Pardies, France and certain other actions.
 
  •  Released our 2008 Sustainability Report, which details our industry-leading commitment to safety, health and the environment across our worldwide operations. The report also highlights best practices driven by our employees around the world.
 
  •  Reached an agreement with the Frankfurt, Germany Airport to receive an advance payment of €322 million associated with the relocation of our Ticona business in Kelsterbach, Germany. This advance payment will be in lieu of payments of €200 million and €140 million originally scheduled to be paid in June 2009 and June 2010, respectively.
 
During the first half of 2008, the US and Europe began to experience challenging economic conditions that resulted in significant inflation in raw material and energy pricing. Despite the challenges, we were able to implement higher pricing on continued strong demand and higher volumes associated with our growth strategy in Asia, all of which contributed to growth in net sales during the period.
 
During the second half of 2008, recessionary trends stemming from the US credit crisis quickly spread to other regions of the world. This triggered an unexpected reduction in consumer and industrial demand that caused our customers to sharply lower their inventories during the last few months of the year. As a result, demand for our products declined dramatically and we aggressively managed our global production capacity to align with the current environment. During this period of economic uncertainty, we remained focused on executing our long-term strategy to increase the value of Celanese.
 
2009 Outlook
 
We expect inventory destocking to diminish in 2009, but do not foresee a short-term recovery in the global economic environment. We expect earnings to improve from fourth quarter levels throughout the year as the impact of destocking and the negative effects of lower-of-cost or market and first-in, first-out inventory accounting decrease.
 
We are taking aggressive actions in response to the expected prolonged weak demand environment. These actions include an assessment of our current manufacturing footprint and reductions of our overall fixed cost structure. Initial fixed cost reductions have been initiated and are estimated to result in between $100 million and $120 million of cost savings annually.
 
Expansion in China
 
The Nanjing complex brings world-class scale to one site for the production of acetic acid, VAM, acetic anhydride, emulsions, Celstran® long fiber reinforced thermoplastic (“LFRT”), GUR®, Vectra® LCP and compounding. We believe the Nanjing complex will further enhance our capabilities to better meet the growing needs of our customers in a number of industries across Asia.
 
The acetic acid facility located in our Nanjing, China complex achieved normal operations in June 2007 and we commenced production of vinyl acetate emulsions at the complex during the fourth quarter of 2007. During the


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first quarter of 2008, we commissioned the startup of our LFRT unit in Nanjing. Our newly constructed 20,000 ton GUR® facility, 100,000 ton acetic anhydride facility and 300,000 ton VAM facility started up during the third quarter of 2008. Operations for the compounding plant at the complex are expected to begin during 2009.
 
In 2008, we announced our plans to build an LCP production facility at our Nanjing complex. Construction for the LCP production facility and start-up dates will depend on market conditions.
 
Financial Highlights
 
                         
    Year Ended December 31,  
    2008     2007     2006  
    (In $ millions, except percentages)  
 
Statement of Operations Data:
                       
Net sales
    6,823       6,444       5,778  
Gross profit
    1,256       1,445       1,309  
Selling, general and administrative expenses
    (540 )     (516 )     (536 )
Other (charges) gains, net
    (108 )     (58 )     (10 )
Operating profit
    440       748       620  
Equity in net earnings of affiliates
    54       82       76  
Interest expense
    (261 )     (262 )     (293 )
Refinancing expenses
          (256 )     (1 )
Dividend income — cost investments
    167       116       79  
Earnings (loss) from continuing operations before tax and minority interests
    434       447       526  
Earnings (loss) from continuing operations
    372       336       319  
Earnings (loss) from discontinued operations
    (90 )     90       87  
Net earnings
    282       426       406  
Other Data:
                       
Depreciation and amortization
    350       291       269  
Operating margin(1)
    6.4 %     11.6 %     10.7 %
Earnings from continuing operations before tax and minority interests as a percentage of net sales
    6.4 %     6.9 %     9.1 %
 
 
(1) Defined as operating profit divided by net sales.
 
                 
    As of December 31,  
    2008     2007  
    (In $ millions)  
 
Balance Sheet Data:
               
Short-term borrowings and current installments of long-term debt — third party and affiliates
    233       272  
Plus: Long-term debt
    3,300       3,284  
                 
Total debt
    3,533       3,556  
Less: Cash and cash equivalents
    676       825  
                 
Net debt
    2,857       2,731  
                 
 
Summary of Consolidated Results — Year Ended December 31, 2008 compared with Year Ended December 31, 2007
 
The challenging economic environment in the United States and Europe during the first half of 2008 resulted in higher raw material and energy costs which enabled price increase initiatives across all segments. During the second half of 2008, the US credit crisis accelerated the economic slowdown and its spread to other regions of the world. Despite the halt in demand, we were able to maintain the majority of our enacted price increases through the


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remainder of 2008. As a result, increased prices improved net sales by 8%. Favorable foreign currency impacts also had a positive impact on net sales of 3%.
 
Net sales declined 5% due to decreased volumes. Lower volumes were primarily a result of decreased demand stemming from the global economic downturn. As demand declined, particularly during the fourth quarter of 2008, our customers began destocking to reduce their inventory levels. In response, we aggressively managed our global production capacity to align with the current environment. We expect destocking trends to continue to a lesser extent into the first quarter of 2009. Decreased volumes in our acetate flake and tow businesses were not significantly impacted by the economic downturn. Rather, decreased flake volumes were the result of our strategic decision to shift our flake production to our China ventures, which we account for as cost investments. The full impact of this shift has been realized during 2008 and thus the resulting trend of diminishing volumes is not expected to continue.
 
Gross profit declined as higher raw material, energy and freight costs more than offset increases in net sales during the period. The uncertain economic environment resulted in higher natural gas, ethylene, methanol and other commodity prices during the first nine months of the year. Our freight costs also increased, primarily due to increased rates driven by higher energy prices. Late in 2008, raw material and energy prices declined and we expect that decline to positively impact gross profit during the first quarter of 2009.
 
Other (charges) gains, net increased $50 million during 2008 as compared to 2007:
 
                 
    Year Ended
 
    December 31,  
    2008     2007  
    (In $ millions)  
 
Employee termination benefits
    (21 )     (32 )
Plant/office closures
    (7 )     (11 )
Deferred compensation triggered by Exit Event
          (74 )
Insurance recoveries associated with plumbing cases
          4  
Insurance recoveries associated with Clear Lake, Texas
    38       40  
Resolution of commercial disputes with a vendor
          31  
Asset impairments
    (115 )     (9 )(1)
Ticona Kelsterbach plant relocation
    (12 )     (5 )
Sorbates antitrust actions
    8        
Other
    1       (2 )
                 
Total Other (charges) gains, net
    (108 )     (58 )
                 
 
 
(1) Includes $6 million of goodwill impairment
 
Other charges increased in 2008 compared to 2007 and includes a long-lived asset impairment loss of $92 million in connection with the potential closure of our acetic acid and VAM production facility in Pardies, France, our VAM production unit in Cangrejera, Mexico and certain other facilities. Consideration of this potential capacity reduction was necessitated by the significant change in the global economic environment and anticipated lower customer demand. Following the initial assessment of this capacity reduction, we determined we would shut down the Cangrejera VAM production unit effective at the end of February 2009.
 
In addition, we recognized $23 million of long-lived asset impairment losses and $13 million of employee termination benefits in 2008 related to the shutdown of our Pampa, Texas facility.
 
Selling, general and administrative expenses increased $24 million during 2008 primarily due to business optimization and finance improvement initiatives.
 
Operating profit decreased due to lower gross profit and higher other charges and selling, general and administrative costs. The absence of a $34 million gain on the sale of our Edmonton, Alberta, Canada facility during 2007 also contributed to lower operating profit in 2008 as compared to 2007.
 
Equity in net earnings of affiliates decreased $28 million during 2008, primarily due to reduced earnings from our Advanced Engineered Materials’ affiliates resulting from higher raw material and energy costs and decreased demand.


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Our effective income tax rate for 2008 was 15% compared to 25% in 2007. The effective income tax rate decreased in 2008 due to: 1) a decrease in the valuation allowance 2) tax credits generated on foreign jurisdictions and 3) the US tax impact of foreign operations.
 
The loss from discontinued operations of $90 million during 2008 primarily relates to a legal settlement agreement we entered into during 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” section in Note 23 of the consolidated financial statements.
 
Summary of Consolidated Results — Year Ended December 31, 2007 compared with Year Ended December 31, 2006
 
For the year ended December 31, 2007, net sales increased by 12% to $6,444 million compared to the same period in 2006 as increases in pricing and favorable currency impacts more than offset lower overall volumes. Overall pricing contributed to a 6% increase in net sales primarily due to a tight global supply of acetyl, PVOH and emulsion products, and higher acetate tow and flake prices. Favorable currency impacts (particularly related to the Euro) also contributed to a 4% increase in net sales and the acquisition of Acetate Products Limited (“APL”) in 2007 increased net sales by $227 million. Strong volume increases due to increased market penetration from several of Advanced Engineered Material’s key products and the successful startup of our acetic acid unit in Nanjing, China helped to partially offset the decreases in volumes in our Acetyl Intermediates and Industrial Specialties segments resulting from the temporary unplanned outage of the acetic acid unit at our Clear Lake, Texas facility.
 
Gross profit as a percentage of net sales remained relatively flat for the year ended December 31, 2007 (22.4%) compared to the same period in 2006 (22.7%). The slight decrease was primarily due to lower overall volumes and higher energy and raw material costs more than offsetting the higher overall prices and favorable currency impacts (particularly related to the Euro).
 
Selling, general and administrative expenses decreased by $20 million for the year ended December 31, 2007 compared to the same period in 2006. The decrease was primarily due to the absence of executive severance and legal costs associated with the Squeeze-Out of $23 million and long-term incentive plan expenses of $20 million, both recorded in 2006. Selling, general and administrative expenses also decreased $5 million due to lower stock-based compensation expenses during the year ended December 31, 2007. The decreases were partially offset by $15 million of additional expenses related to finance improvement initiatives and $6 million related to the revised deferred compensation plan expenses.
 
Other (charges) gains, net increased $48 million during 2007 as compared to 2006:
 
                 
    Year Ended
 
    December 31,  
    2007     2006  
    (In $ millions)  
 
Employee termination benefits
    (32 )     (12 )
Plant/office closures
    (11 )     1  
Deferred compensation triggered by Exit Event
    (74 )      
Insurance recoveries associated with plumbing cases
    4       5  
Insurance recoveries associated with Clear Lake, Texas
    40        
Resolution of commercial disputes with a vendor
    31        
Asset impairments
    (9 )(1)      
Ticona Kelsterbach plant relocation
    (5 )      
Other
    (2 )     (4 )
                 
Total Other (charges) gains, net
    (58 )     (10 )
                 
 
 
(1) Includes $6 million of goodwill impairment


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Other charges for employee termination benefits and plant/office closures include charges related to: 1) our plan to simplify and optimize our Emulsions and PVOH businesses to become a leader in technology and innovation and grow in both new and existing markets and 2) charges related to the sale of our Pampa, Texas facility. Additionally, we recorded a $74 million deferred compensation charge in May 2007 as a result of the triggering of an Exit Event, as defined in Note 20 to the consolidated financial statements. Also included in other charges are $40 million in insurance recoveries we received during the fourth quarter of 2007 in partial satisfaction of claims that we made based on losses resulting from the temporary unplanned outage of the acetic acid unit at our Clear Lake, Texas facility. In addition, during the fourth quarter of 2007, we received $31 million as a one-time payment in resolution of commercial disputes with a vendor.
 
The net $128 million improvement in operating profit during the year ended December 31, 2007 as compared to 2006 is a result of higher net sales, lower selling, general and administrative expenses and a $34 million gain recorded on the sale of our Edmonton, Alberta, Canada facility during 2007, offset by higher other charges, as discussed above.
 
Equity in net earnings of affiliates increased 8% in the year ended December 31, 2007 compared to the same period in 2006 due primarily to improved performance from our InfraServ affiliates.
 
Interest expense decreased $31 million for the year ended December 31, 2007 compared to the same period in 2006. The decrease was primarily related to lower interest rates on the new senior credit agreement compared to the interest rates on the senior discount notes and senior subordinated notes, which were repaid in April 2007 in conjunction with the debt refinancing (see Note 14 to the consolidated financial statements for more information). These decreases were partially offset by an increase in interest expense due to additional China financing activities in 2007.
 
Refinancing expenses incurred during 2007 related to our debt refinancing. As a result of the refinancing, we expensed $207 million of premiums paid on early redemption of debt. In addition, we expensed $33 million of unamortized deferred financing costs and premiums related to the former $2,454 million senior credit facility, senior discount notes and senior subordinated notes and $16 million of debt issuance and other refinancing expenses.
 
Income tax expense decreased by $93 million to $110 million for the year ended December 31, 2007. The effective tax rate for continuing operations for the year ended December 31, 2007 was 25%, which is less than the combined US federal and state statutory rate of 39%. The effective tax rate for 2007 was favorably impacted by (1) an increase in unrepatriated low-taxed earnings including tax holidays and (2) the tax benefit related to German Tax Reform of $39 million recorded during the year ended December 31, 2007. These benefits are partially offset by the accounting treatment of recent tax law changes in Mexico. See Note 19 to the consolidated financial statements for additional information.
 
Earnings from discontinued operations primarily relate to Acetyl Intermediates’ sale of its oxo products and derivatives businesses in February 2007, the shut down of its Edmonton, Alberta, Canada methanol operations during the second quarter of 2007 and its pentaerythritol (“PE”) operations, which were discontinued during the third quarter of 2006. As a result, revenues and expenses related to these businesses and operations are reflected as a component of discontinued operations.


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Selected Data by Business Segment — Year Ended December 31, 2008 Compared with Year Ended December 31, 2007 and Year Ended December 31, 2007 Compared with Year Ended December 31, 2006
 
                                                 
    Year Ended December 31,     Year Ended December 31,  
                Change
                Change
 
    2008     2007     in $     2007     2006     in $  
    (In $ millions)  
 
Net sales
                                               
Advanced Engineered Materials
    1,061       1,030       31       1,030       915       115  
Consumer Specialties
    1,155       1,111       44       1,111       876       235  
Industrial Specialties
    1,406       1,346       60       1,346       1,281       65  
Acetyl Intermediates
    3,875       3,615       260       3,615       3,351       264  
Other Activities
    2       2             2       22       (20 )
Inter-segment Eliminations
    (676 )     (660 )     (16 )     (660 )     (667 )     7  
                                                 
Net sales
    6,823       6,444       379       6,444       5,778       666  
                                                 
Other (charges) gains, net
                                               
Advanced Engineered Materials
    (29 )     (4 )     (25 )     (4 )     6       (10 )
Consumer Specialties
    (2 )     (4 )     2       (4 )           (4 )
Industrial Specialties
    (3 )     (23 )     20       (23 )     (11 )     (12 )
Acetyl Intermediates
    (78 )     72       (150 )     72             72  
Other Activities
    4       (64 )     68       (64 )     (5 )     (59 )
Inter-segment Eliminations
          (35 )     35       (35 )           (35 )
                                                 
Other (charges) gains, net
    (108 )     (58 )     (50 )     (58 )     (10 )     (48 )
                                                 
Operating profit
                                               
Advanced Engineered Materials
    32       133       (101 )     133       145       (12 )
Consumer Specialties
    190       199       (9 )     199       165       34  
Industrial Specialties
    47       28       19       28       44       (16 )
Acetyl Intermediates
    309       616       (307 )     616       456       160  
Other Activities
    (138 )     (228 )     90       (228 )     (190 )     (38 )
                                                 
Operating profit
    440       748       (308 )     748       620       128  
                                                 
Earnings (loss) from continuing operations before tax and minority interests
                                               
Advanced Engineered Materials
    69       189       (120 )     189       201       (12 )
Consumer Specialties
    237       235       2       235       185       50  
Industrial Specialties
    47       28       19       28       43       (15 )
Acetyl Intermediates
    434       694       (260 )     694       519       175  
Other Activities
    (353 )     (699 )     346       (699 )     (422 )     (277 )
                                                 
Earnings (loss) from continuing operations before tax and minority interests
    434       447       (13 )     447       526       (79 )
                                                 
Depreciation and amortization
                                               
Advanced Engineered Materials
    76       69       7       69       65       4  
Consumer Specialties
    53       51       2       51       39       12  
Industrial Specialties
    62       59       3       59       59        
Acetyl Intermediates
    150       106       44       106       101       5  
Other Activities
    9       6       3       6       5       1  
                                                 
Depreciation and amortization
    350       291       59       291       269       22  
                                                 


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Factors Affecting Year Ended December 31, 2008 Segment Net Sales Compared to Year Ended December 31, 2007
 
The tables below set forth the percentage increase (decrease) in net sales attributable to each of the factors indicated in each of our business segments.
 
                                         
    Volume     Price     Currency     Other     Total  
    (In percentages)  
 
Advanced Engineered Materials
    (4 )     3       4             3  
Consumer Specialties
    (6 )     7       1       2 (b)     4  
Industrial Specialties
    (10 )     11       4       (1 )(c)     4  
Acetyl Intermediates
    (3 )     7       3             7  
Total Company(a)
    (5 )     8       3             6  
 
Factors Affecting Year Ended December 31, 2007 Segment Net Sales Compared to Year Ended December 31, 2006
 
                                         
    Volume     Price     Currency     Other     Total  
    (In percentages)  
 
Advanced Engineered Materials
    9       (1 )     5             13  
Consumer Specialties
    (4 )     4       1       26 (b)     27  
Industrial Specialties
    (1 )     2       5       (1 )(c)     5  
Acetyl Intermediates
    (5 )     9       4             8  
Total Company(a)
    (2 )     6       4       4       12  
 
 
(a) Includes the effects of the captive insurance companies.
 
(b) Includes net sales from the APL acquisition.
 
(c) Includes loss of sales related to the AT Plastics’ Films business.
 
Summary by Business Segment — Year Ended December 31, 2008 Compared with Year Ended December 31, 2007
 
Advanced Engineered Materials
 
                         
    Year Ended December 31,     Change
 
    2008     2007     in $  
    (In $ millions, except percentages)  
 
Net sales
    1,061       1,030       31  
Net sales variance:
                       
Volume
    (4 )%                
Price
    3 %                
Currency
    4 %                
Other
    0 %                
Operating profit
    32       133       (101 )
Operating margin
    3.0 %     12.9 %        
Other (charges) gains, net
    (29 )     (4 )     (25 )
Earnings (loss) from continuing operations before tax and minority interests
    69       189       (120 )
Depreciation and amortization
    76       69       7  
 
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. Together with our strategic affiliates, we are a leading participant in the global technical polymers industry. The primary products of Advanced Engineered Materials are POM, PPS, LFRT, PBT, PET,


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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.
 
Net sales increased 3% during 2008 as compared to 2007 primarily as a result of implemented pricing increases combined with favorable foreign currency impacts. Increases in net sales were partially offset by lower volumes due to significant weakness in the US and European automotive and housing industries. Extended plant shutdowns enacted by major car manufacturers during the fourth quarter of 2008 contributed significantly to the volume decline.
 
Operating profit declined $101 million primarily due to higher raw material, freight and energy costs. Raw material costs increased on higher prices while freight costs increased as a result of increased freight rates and larger shipments to Asia. Raw material costs declined late in 2008 and we expect to realize a benefit from the lower prices early in 2009 as our higher-cost inventory levels diminish. Higher depreciation and amortization expense and increased other charges also contributed to lower operating profit. Depreciation and amortization expense are higher in 2008 due to the start-up of the GUR® and LFRT units in Asia. Other charges consist primarily of a $16 million long-lived asset impairment loss related to the potential closure of certain Advanced Engineered Materials’ facilities and $12 million related to the relocation of our Ticona plant in Kelsterbach. See “Ticona Kelsterbach Plant Relocation” below.
 
Earnings from continuing operations before tax and minority interests decreased due to decreased operating profit and decreased equity in net earnings of affiliates. Equity in net earnings of affiliates decreased $18 million during 2008, primarily due to reduced earnings from our Advanced Engineered Materials’ affiliates resulting from higher raw material and energy costs and decreased demand.
 
Ticona Kelsterbach Plant Relocation
 
In 2007, we finalized a settlement agreement with the Frankfurt, Germany Airport (“Fraport”) to relocate our Kelsterbach, Germany, business, resolving several years of legal disputes related to the planned Frankfurt airport expansion. As a result of the settlement, we will transition Ticona’s operations from Kelsterbach to the Hoechst Industrial Park in the Rhine Main area by mid-2011. Over a five-year period, Fraport will pay Ticona a total of €670 million to offset the costs associated with the transition of the business from its current location and the closure of the Kelsterbach plant. In June 2008, we received €200 million ($311 million) from Fraport under this agreement. Amounts received from Fraport are accounted for as deferred proceeds and are included in noncurrent other liabilities in the consolidated balance sheets.
 
In February 2009, we 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. On February 5, 2009, we received a discounted amount of approximately €322 million, excluding value-added tax of €59 million.
 
Below is a summary of the cash flow activity and financial statement impact associated with the Ticona plant relocation:
 
                         
    Year Ended
    Total From
 
    December 31,     Inception through
 
    2008     2007     December 31, 2008  
    (In $ millions)  
 
Proceeds received from Fraport
    311             337  
Costs expensed
    12       5       17  
Costs capitalized(1)
    202       40       243  
 
 
(1) Includes an increase in accrued capital expenditures of $17 million and $19 million during the years ended December 31, 2008 and 2007, respectively.


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Consumer Specialties
 
                         
    Year Ended December 31,     Change
 
    2008     2007     in $  
    (In $ millions, except percentages)  
 
Net sales
    1,155       1,111       44  
Net sales variance:
                       
Volume
    (6 )%                
Price
    7 %                
Currency
    1 %                
Other
    2 %                
Operating profit
    190       199       (9 )
Operating margin
    16.4 %     17.9 %        
Other (charges) gains, net
    (2 )     (4 )     2  
Earnings (loss) from continuing operations before tax and minority interests
    237       235       2  
Depreciation and amortization
    53       51       2  
 
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 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 pharmaceuticals industries.
 
Net sales increased 4% to $1,155 million during the year ended December 31, 2008 driven primarily by pricing actions in our Acetate Products business and an additional month of sales from our Acetate Products Limited (“APL”) acquisition, which was acquired on January 31, 2007, offset by lower volumes. Lower volumes are a direct result of our strategic decision to shift acetate flake production to our China ventures, which are accounted for as cost method investments. The full impact of this shift has been realized during 2008 and thus the resulting trend of diminishing volumes is not expected to continue. Lower flake volumes were partially offset by a 5% increase in tow volumes as we were able to capture a portion of the growth in global tow demand.
 
The increase in net sales due to higher sales prices during 2008 was offset most significantly by higher energy costs, and to a lesser extent, higher raw material and freight costs. Operating profit, as compared to 2007, declined primarily due to the absence of a $22 million gain on the sale of our Edmonton, Alberta, Canada facility in 2007. Other charges during 2007 includes $3 million of deferred compensation plan expenses and $5 million of other restructuring charges, offset by insurance recoveries of $5 million for partial satisfaction of the business interruption losses resulting from the temporary unplanned outage of the acetic acid unit at our Clear Lake, Texas facility.
 
Earnings from continuing operations before tax and minority interests of $237 million increased from 2007 as increased dividends from our China ventures more than offset the decline in operating profit. Increased dividends are the result of increased volumes and higher prices, as well as efficiency improvements.


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Industrial Specialties
                         
    Year Ended December 31,     Change
 
    2008     2007     in $  
    (In $ millions, except percentages)  
 
Net sales
    1,406       1,346       60  
Net sales variance:
                       
Volume
    (10 )%                
Price
    11 %                
Currency
    4 %                
Other
    (1 )%                
Operating profit
    47       28       19  
Operating margin
    3.3 %     2.1 %        
Other (charges) gains, net
    (3 )     (23 )     20  
Earnings (loss) from continuing operations before tax and minority interests
    47       28       19  
Depreciation and amortization
    62       59       3  
 
Our Industrial Specialties segment includes our Emulsions, PVOH and AT Plastics 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 VOC (volatile organic compounds), an environmentally-friendly technology. As a global leader, our PVOH business produces a broad portfolio of performance PVOH chemicals engineered to meet specific customer requirements. Our emulsions and PVOH products are used in a wide array of applications including paints and coatings, adhesives, building and construction, glass fiber, textiles and paper. AT Plastics offers a complete line of low-density polyethylene and specialty ethylene vinyl acetate resins and compounds. AT Plastics’ 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.
 
Net sales increased by 4% during 2008 as increased prices and favorable foreign currency impacts more than offset volume reductions. Pricing actions implemented by all business lines late in 2007 and during 2008 contributed to the increase in net sales. Volumes declined primarily on decreased demand across all regions due to the global economic downturn combined with the temporary shutdown of our AT Plastics plant late in 2008. The overall volume decline was partially offset by increased emulsions volumes at our Nanjing, China facility, which began operating late in 2008.
 
Increased net sales were more than offset by higher raw material and energy costs during 2008. The $19 million increase in operating profit was primarily due to lower other charges and the absence of the $7 million loss on the divestiture of our AT Plastics’ Films business in 2007. During 2007, we initiated a plan to simplify and optimize our Emulsions and PVOH businesses to focus on technology and innovation. Other charges during 2008 includes a charge of $3 million for employee termination benefits and accelerated depreciation related to this plan. Other charges during 2007 includes a charge of $14 million for employee termination benefits, $3 million for an impairment of long-lived assets and $5 million of accelerated depreciation expense for our shuttered United Kingdom plant related to this plan. Other charges in 2007 also include $6 million of goodwill impairment and receipt of $7 million in insurance recoveries in partial satisfaction of the business interruption losses resulting from the temporary unplanned outage of the acetic acid unit at our Clear Lake, Texas facility.


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Acetyl Intermediates
                         
    Year Ended December 31,     Change
 
    2008     2007     in $  
    (In $ millions, except percentages)  
 
Net sales
    3,875       3,615       260  
Net sales variance:
                       
Volume
    (3 )%                
Price
    7 %                
Currency
    3 %                
Other
    0 %                
Operating profit
    309       616       (307 )
Operating margin
    8.0 %     17.0 %        
Other (charges) gains, net
    (78 )     72       (150 )
Earnings (loss) from continuing operations before tax and minority interests
    434       694       (260 )
Depreciation and amortization
    150       106       44  
 
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 increased by 7% during 2008 primarily due to increased prices and favorable foreign currency impacts, partially offset by lower volumes. Our formula-based pricing arrangements benefited from higher ethylene and methanol costs during the first nine months of 2008. Market tightness in the Americas and favorable foreign currency impacts in Europe also contributed to the increase in net sales. Reduced volumes offset the increase in net sales as the slowdown of the global economy caused customers to slow production and diminish current inventory levels, particularly in Asia during the fourth quarter. We expect the impact of our customers’ destocking initiatives to continue to a lesser extent during 2009. Ethylene and methanol prices decreased during the fourth quarter of 2008 on slowed global demand.
 
Operating profit declined $307 million primarily as a result of higher ethylene, methanol and energy prices, increased other charges, increased depreciation and amortization and the absence of a $12 million gain on the sale of our Edmonton facility in 2007. Other charges increased during 2008 partially due to $76 million of long-lived asset impairment losses recognized in 2008 related to the potential closure of our acetic acid and VAM production facility in Pardies, France, our VAM production unit in Cangrejera, Mexico (which we subsequently decided to shut down effective at the end of February 2009) and certain other facilities. Other charges in 2008 also includes $23 million of long-lived asset impairment and $13 million of severance and retention charges related to the shutdown of our Pampa, Texas facility. Also contributing to the increase was the absence of a one-time payment of $31 million received in 2007 in resolution of commercial disputes with a vendor and a $25 million decrease in insurance recoveries received in partial satisfaction of the losses resulting from the temporary outage of the acetic acid unit at our Clear Lake, Texas facility. Increased depreciation and amortization expense during 2008 is the result of accelerated depreciation associated with the shutdown of our Pampa, Texas facility and a full year of depreciation for our acetic acid plant in Nanjing, China, which started up in mid-2007.
 
Earnings from continuing operations before tax and minority interest differs from operating profit primarily as a result of dividend income from our cost investment, National Methanol Co. (“Ibn Sina”). Increased dividend income of $41 million during 2008 had a positive impact on earnings from continuing operations before tax and minority interest. Ibn Sina increased their dividends as a result of higher earnings from expanding margins for methanol and methyl tertiary-butyl ether.


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Other Activities
 
Other Activities primarily consists of corporate center costs, including finance and administrative activities, and our captive insurance companies.
 
Net sales remained flat in 2008 as compared to 2007. We do not expect third-party revenues from our captive insurance companies to increase significantly in the near future.
 
The operating loss for Other Activities improved $90 million during 2008 as compared to 2007 due to lower other charges, partially offset by higher selling, general and administrative expenses. Other charges decreased principally due to the release of reserves related to the Sorbates antitrust actions settlement of $8 million and the absence of $59 million of deferred compensation plan costs which were incurred during 2007. Selling, general and administrative expenses increased due to additional spending on business optimization and finance improvement initiatives during 2008.
 
The loss from continuing operations before tax and minority interests decreased $346 million during 2008. The significant decrease was primarily due to the absence of $256 million of refinancing costs incurred in 2007 and the decrease in the operating loss discussed above.
 
Summary by Business Segment — Year Ended December 31, 2007 Compared with Year Ended December 31, 2006
 
Advanced Engineered Materials
                         
    Year Ended December 31,     Change
 
    2007     2006     in $  
    (In $ millions, except percentages)  
 
Net sales
    1,030       915       115  
Net sales variance:
                       
Volume
    9 %                
Price
    (1 )%                
Currency
    5 %                
Other
    0 %                
Operating profit
    133       145       (12 )
Operating margin
    12.9 %     15.8 %        
Other (charges) gains, net
    (4 )     6       (10 )
Earnings (loss) from continuing operations before tax and minority interests
    189       201       (12 )
Depreciation and amortization
    69       65       4  
 
Advanced Engineered Materials’ net sales increased 13% for the year ended December 31, 2007 compared to the same period in 2006 primarily due to volume growth in all major business lines and favorable currency impacts partially offset by a slight decline in pricing. Overall volume for the year increased, principally driven by increased market penetration, successful implementation of new projects and a continued strong business environment, particularly in Europe. Advanced Engineered Materials experienced a slight decline in average pricing primarily driven by a larger mix of sales from lower priced products.
 
Operating profit decreased to $133 million for the year ended December 31, 2007 compared to $145 million for the same period in 2006 as higher volumes and favorable currency impacts were more than offset by higher energy costs, increased other charges and slightly lower average pricing. Other charges increased primarily due to $2 million of deferred compensation plan expenses and $5 million of Kelsterbach plant relocation costs, both incurred in 2007.
 
Earnings from continuing operations before tax and minority interests decreased 6% to $189 million for the year ended December 31, 2007 compared to the same period in 2006 primarily due to lower operating profits in 2007 driven by increased other charges as discussed above.


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Consumer Specialties
 
                         
    Year Ended December 31,     Change
 
    2007     2006     in $  
    (In $ millions, except percentages)  
 
Net sales
    1,111       876       235  
Net sales variance:
                       
Volume
    (4 )%                
Price
    4 %                
Currency
    1 %                
Other
    26 %                
Operating profit
    199       165       34  
Operating margin
    17.9 %     18.8 %        
Other (charges) gains, net
    (4 )           (4 )
Earnings (loss) from continuing operations before tax and minority interests
    235       185       50  
Depreciation and amortization
    51       39       12  
 
Consumer Specialties’ net sales increased 27% for the year ended December 31, 2007 compared to the same period in 2006 primarily driven by additional net sales from the APL acquisition completed on January 31, 2007. Net sales for APL were $227 million during the year ended December 31, 2007. Higher pricing for acetate tow and flake products, higher Sunett® sweetener volumes and favorable currency impacts for the Nutrinova business also contributed to the overall increase in net sales. Higher Sunett® sweetener volumes reflected the continued growth in the global beverage and confectionary markets. These increases were partially offset by lower acetate flake volumes and Nutrinova’s exit of non-core lower margin trade business during the fourth quarter of 2006. The decrease in acetate flake volumes was due primarily to the shift in production of acetate flake to our China ventures.
 
Operating profit increased $34 million for the year ended December 31, 2007 compared to the same period in 2006. Higher overall pricing more than offset increases in raw material costs. Higher overall costs were primarily due to price increases in wood pulp, acetyls (used as raw materials in acetate flake production) and acetate flake as well as expenses associated with the continued integration of APL. Other charges during the year ended December 31, 2007 includes $3 million of deferred compensation plan expenses, $5 million of other restructuring charges and insurance recoveries of $5 million for partial satisfaction of the losses resulting from the temporary unplanned outage of the acetic acid unit at our Clear Lake, Texas facility. Also included in operating profit for the year ended December 31, 2007 is a $22 million gain related to the sale of our Edmonton, Alberta, Canada facility.
 
Earnings from continuing operations before tax and minority interests increased $50 million to $235 million for the year ended December 31, 2007 compared to the same period in 2006. The increase was driven principally by the changes in operating profit discussed above and an increase of $16 million in dividends received from our China ventures during the year ended December 31, 2007 compared to the same period in 2006.
 
Depreciation and amortization increased $12 million to $51 million for the year ended December 31, 2007 compared to the same period in 2006 primarily driven by the acquisition of APL in 2007.


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Industrial Specialties
 
                         
    Year Ended December 31,     Change
 
    2007     2006     in $  
    (In $ millions, except percentages)  
 
Net sales
    1,346       1,281       65  
Net sales variance:
                       
Volume
    (1 )%                
Price
    2 %                
Currency
    5 %                
Other
    (1 )%                
Operating profit
    28       44       (16 )
Operating margin
    2.1 %     3.4 %        
Other (charges) gains, net
    (23 )     (11 )     (12 )
Earnings (loss) from continuing operations before tax and minority interests
    28       43       (15 )
Depreciation and amortization
    59       59        
 
Industrial Specialties’ net sales for the year ended December 31, 2007 increased 5% to $1,346 million compared to the same period in 2006 primarily driven by pricing increases and favorable currency impacts partially offset by a slight decrease in volumes. Higher overall pricing, particularly in our emulsions and PVOH products, was primarily due to market tightness and increasing raw material costs which allowed for upward movement in pricing across all regions. Lower volumes were primarily driven by the tight supply of VAM, a major raw material used in the production of emulsions products. This was a result of the temporary unplanned outage of the acetic acid unit at our Clear Lake, Texas facility and other global planned and unplanned production outages in the chemical industry during the year ended December 31, 2007. The increase in net sales was partially offset by the absence of net sales from the AT Plastics’ Films business, which was divested during the third quarter of 2007.
 
Operating profit decreased $16 million to $28 million for the year ended December 31, 2007 compared to the same period in 2006. Higher prices and favorable currency impacts were more than offset by the increase in other charges. Other charges for the year ended December 31, 2007 included $14 million of employee termination benefits, $3 million for an impairment of long-lived assets and $5 million of accelerated depreciation expense for our shuttered United Kingdom plant. These increases were a result of our plan to simplify and optimize our Emulsions and PVOH businesses to become a leader in technology and innovation and grow in both new and existing markets. Other charges for the year ended December 31, 2007 also included $6 million of goodwill impairment. The increase in other charges was partially offset by insurance recoveries of $7 million for partial satisfaction of the losses resulting from the temporary unplanned outage of the acetic acid unit at our Clear Lake, Texas facility. Additionally, operating profit decreased by $7 million during the year ended December 31, 2007 as a result of the loss on the divestiture of our AT Plastics’ Films business.
 
Earnings from continuing operations before tax and minority interests decreased $15 million to $28 million for the year ended December 31, 2007 compared to the same period in 2006 principally driven by lower operating profits.


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Acetyl Intermediates
 
                         
    Year Ended
       
    December 31,     Change
 
    2007     2006     in $  
    (In $ millions, except percentages)  
 
Net sales
    3,615       3,351       264  
Net sales variance:
                       
Volume
    (5 )%                
Price
    9 %                
Currency
    4 %                
Other
    0 %                
Operating profit
    616       456       160  
Operating margin
    17.0 %     13.6 %        
Other (charges) gains, net
    72             72  
Earnings (loss) from continuing operations before tax and minority interests
    694       519       175  
Depreciation and amortization
    106       101       5  
 
Acetyl Intermediates’ net sales for the year ended December 31, 2007 increased 8% to $3,615 million compared to the same period in 2006 driven by pricing increases and favorable currency impacts partially offset by lower volumes. Tight supply of acetyl products caused by global planned and unplanned production outages in the industry and higher methanol and ethylene prices were the drivers of the price increases. Lower volumes in 2007 were the result of lower product availability due to the temporary unplanned outage of the acetic acid unit at our Clear Lake, Texas facility. However, the decrease in volumes from the Clear Lake, Texas facility was partially offset by the successful startup of our acetic acid plant in Nanjing, China and externally procured product.
 
Operating profit increased to $616 million for the year ended December 31, 2007 compared to $456 million in the same period in 2006. Higher pricing, favorable currency impacts and an improvement in other charges were partially offset by higher raw material costs. Other charges for the year ended December 31, 2007 included $4 million of employee termination benefits and $5 million of expenses related to accelerated depreciation expense, both associated with the shutdown of our Pampa, Texas plant, and $10 million for deferred compensation plan expenses. These charges were more than offset by $31 million related to a one-time payment received in resolution of commercial disputes with a vendor and insurance recoveries of $28 million for partial satisfaction of the losses resulting from the temporary unplanned outage of the acetic acid unit at our Clear Lake, Texas facility. Acetyl Intermediates also received $35 million of insurance recoveries from our captive insurance companies relating to the unplanned outage of the acetic acid unit at our Clear Lake, Texas facility. This amount is included in Acetyl Intermediates’ other charges but is properly eliminated in our consolidated statements of operations. Operating profit also includes a gain on the sale of our Edmonton facility of $12 million.
 
Earnings from continuing operations before tax and minority interests increased $175 million to $694 million for the year ended December 31, 2007 compared to the same period in 2006 primarily driven by higher operating profit and an increase in dividend income from our cost investments. Dividend income from Ibn Sina cost investment increased $24 million due to increased earnings for the year ended December 31, 2007 compared to the same period in 2006.
 
Other Activities
 
Net sales for Other Activities decreased to $2 million from $22 million for the year ended December 31, 2007 compared to the same period in 2006. This decrease was principally driven by the decrease in third-party revenues from our captive insurance companies.
 
Operating loss increased to $228 million for the year ended December 31, 2007 compared to $190 million in the same period in 2006. This increase was principally driven by an increase in other charges more than offsetting a decrease in selling, general and administrative expenses. Other charges increased primarily due to $59 million of deferred compensation plan costs expensed in 2007. Selling, general and administrative expenses decreased for the


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year ended December 31, 2007 primarily due to the absence of executive severance and legal costs associated with the Squeeze-Out of $23 million and long-term incentive plan expenses of $20 million recorded in 2006.
 
Loss from continuing operations before tax and minority interests increased $277 million to $699 million for the year ended December 31, 2007 compared to the same period in 2006. The increase was primarily driven by the increase in operating loss discussed above and higher refinancing expenses incurred in 2007, partially offset by lower interest expense. During the year ended December 31, 2007, we incurred $256 million of refinancing expenses associated with the April 2, 2007 debt refinancing. Interest expense decreased $31 million during the year ended December 31, 2007 compared to the same period in 2006 primarily related to lower interest rates on the new senior credit agreement compared to the interest rates on the senior discount notes and senior subordinated notes, which were repaid in April 2007 in conjunction with the debt refinancing. In addition, during the year ended December 31, 2007, we incurred $26 million of mark-to-market loss on the cross currency swap and the Euro denominated term loan that had been used as a hedge of our net investment in our European subsidiaries.
 
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 a $650 million revolving credit facility and a $228 million credit-linked revolving facility to assist, if required, in meeting our working capital needs and other contractual obligations. In excess of 20 lenders participate in our revolving credit facility, each with a commitment of not more than 10% of the $650 million commitment. Further, Lehman Brothers Holdings, Inc., which filed for protection under Chapter 11 of the United States Bankruptcy Code in September 2008, is not a lender under our revolving credit facility and we do not have any other material direct exposure to Lehman Brothers Holdings, Inc.
 
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.
 
On a stand-alone basis, Celanese Corporation has no material assets other than the stock of our subsidiaries and no independent external operations of our own. As such, we generally will depend on the cash flow of our subsidiaries to meet our obligations under our preferred stock, our Series A common stock and our senior credit agreement.
 
Cash Flows
 
Cash and cash equivalents as of December 31, 2008 were $676 million, which was a decrease of $149 million from December 31, 2007. Cash and cash equivalents as of December 31, 2007 were $825 million, which was an increase of $34 million from December 31, 2006. See below for details on the change in cash and cash equivalents from December 31, 2007 to December 31, 2008 and the change in cash and cash equivalents from December 31, 2006 to December 31, 2007.
 
Net Cash Provided by Operating Activities
 
Cash flow provided by operating activities increased $20 million to a cash inflow of $586 million in 2008 from a cash inflow of $566 million for the same period in 2007. Operating cash flows were favorably impacted by positive trade working capital changes ($202 million), lower cash taxes paid ($83 million) and the absence of adjustments to cash for discontinued operations. Adjustments to cash for discontinued operations of $84 million during 2007 related primarily to working capital changes of the oxo products and derivatives businesses and the shut down of our Edmonton, Alberta, Canada methanol facility. Offsetting the increase in cash flows were an increase in net cash interest paid ($78 million), cash spent on legal settlements ($134 million) and decreased operating profit during the period.
 
Cash flow provided by operating activities decreased to a cash inflow of $566 million in 2007 compared to a cash inflow of $751 million for the same period in 2006. The decrease in operating cash flows was primarily due to


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adjustments to cash for discontinued operations and an increase in working capital, partially offset by an increase in earnings from continuing operations. Earnings from continuing operations increased to $336 million during the year ended December 31, 2007 compared with $319 million for the same period in 2006.
 
Net Cash Provided by/Used in Investing Activities
 
Net cash from investing activities decreased from a cash inflow of $143 million in 2007 to a cash outflow of $201 million in 2008. Net cash from investing activities decreased primarily due to cash spent in settlement of our cross currency swaps of $93 million (see Note 22 to the consolidated financial statements) and the absence of proceeds from the sale of our oxo products and derivatives businesses during 2007. These amounts were offset by net cash received on the sale of marketable securities ($111 million) and the excess of cash received from Fraport over amounts spent in connection with the Ticona Kelsterbach plant relocation.
 
Net cash from investing activities improved to a cash inflow of $143 million in 2007 compared to a cash outflow of $268 million in 2006. The increase in cash inflow was primarily due to the proceeds from the sale of our oxo products and derivatives businesses partially offset by the cash outflow for the APL acquisition. Additionally, our cash outflow for capital expenditures during the year ended December 31, 2007 was $44 million higher compared to the same period in 2006. During the year ended December 31, 2006, we increased restricted cash by $42 million related to the anticipated payment to minority shareholders for their remaining Celanese GmbH, formerly Celanese AG, shares. During the year ended December 31, 2007, as a result of the completion of the Squeeze-Out (see Note 4 to the consolidated financial statements) and the payment to minority shareholders for their remaining Celanese GmbH shares, restricted cash decreased $46 million.
 
Our cash outflow for capital expenditures were $274 million, $288 million and $244 million for the years ended December 31, 2008, 2007 and 2006, respectively, excluding amounts related to the relocation of our Ticona plant in Kelsterbach. Capital expenditures were primarily related to major replacements of equipment, capacity expansions, major investments to reduce future operating costs and environmental, health and safety initiatives. Capital expenditures in 2008, 2007 and 2006 included costs for the expansion of our Nanjing, China site into an integrated chemical complex. Cash outflows for capital expenditures are expected to be approximately $175 million in 2009, excluding amounts related to the relocation of our Ticona plant in Kelsterbach.
 
On February 5, 2009, we received approximately €322 million of cash from Fraport in connection with the Ticona Kelsterbach plant relocation, excluding value-added tax of €59 million. We anticipate related cash outflows for capital expenditures in 2009 will range from $350 to $370 million.
 
Net Cash Used in Financing Activities
 
Net cash from financing activities increased to a cash outflow of $499 million in 2008 compared to a cash outflow of $714 million during 2007. The increase primarily relates to the absence of cash outflows attributable to the debt refinancing in 2007. Also contributing to the increase, cash spent to repurchase shares was $25 million less during 2008 than during 2007. Decreased cash received for stock option exercises of $51 million partially offset the increase.
 
Net cash from financing activities decreased to a cash outflow of $714 million in 2007 compared to a cash outflow of $108 million in the same period in 2006. The decrease primarily relates to the repurchase of shares of our Series A common stock and the debt refinancing as discussed in Note 17 and Note 14 to the consolidated financial statements, respectively. This decrease was partially offset by $69 million of proceeds received from the exercise of stock options. Primarily as a result of the debt refinancing, we incurred a net cash outflow of $119 million related to repayments of our debt and $240 million for various refinancing expenses during the year ended December 31, 2007. Furthermore, we paid a total of $403 million to repurchase shares of our Series A common stock during the year ended December 31, 2007.
 
In addition, exchange rate effects on cash and cash equivalents decreased to an unfavorable currency effect of $35 million in 2008 compared to a favorable impact of $39 million in 2007 and a favorable impact of $26 million in 2006.


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Debt and Other Obligations
 
As of December 31, 2008, we had total debt of $3,533 million and cash and cash equivalents of $676 million, resulting in net debt of $2,857 million, a $126 million increase over December 31, 2007. Decreased cash of $149 million and noncash increases in debt of $102 million primarily resulting from new capital lease obligations were partially offset by net cash paydowns on debt of $98 million and favorable foreign currency impacts of $27 million.
 
Senior Credit Facilities
 
Our senior credit agreement consists of $2,280 million of US dollar-denominated and €400 million of Euro-denominated term loans due 2014, a $650 million revolving credit facility terminating in 2013 and a $228 million credit-linked revolving facility terminating in 2014. As of December 31, 2008, there were no outstanding borrowings or letters of credit issued under the revolving credit facility; accordingly, $650 million remained available for borrowing. As of December 31, 2008, there were $91 million of letters of credit issued under the credit-linked revolving facility and $137 million remained available for borrowing. Our senior credit agreement requires us to maintain a maximum first lien senior secured leverage ratio not greater than 3.90 to 1.00 if there are outstanding borrowings 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. See Note 14 to the consolidated financial statements for additional information regarding our senior credit facilities.
 
Commitments Relating to Share Capital
 
Our Board of Directors adopted a policy of declaring, subject to legally available funds, a quarterly cash dividend on each share of our Series A common stock at an annual rate of $0.16 per share unless our Board of Directors in its sole discretion determines otherwise. For the years ended December 31, 2008, 2007 and 2006, we paid $24 million, $25 million and $26 million, respectively, in cash dividends on our Series A common stock. On January 5, 2009, we declared a $6 million cash dividend which was paid on February 1, 2009.
 
Holders of our perpetual preferred stock are entitled to receive, when, as and if declared by our Board of Directors, out of funds legally available, quarterly cash dividends at the rate of 4.25% per annum, or $0.265625 per share of liquidation preference. Dividends on the preferred stock are cumulative from the date of initial issuance. The preferred stock is convertible, at the option of the holder, at any time into approximately 1.26 shares of our Series A common stock, subject to adjustments, per $25.00 liquidation preference of the preferred stock. For the years ended December 31, 2008, 2007 and 2006, we paid $10 million annually of cash dividends on our preferred stock. On January 5, 2009, we declared a $3 million cash dividend on our convertible perpetual preferred stock, which was paid on February 1, 2009.
 
Based upon the number of outstanding shares as of December 31, 2008, the cash dividends to be paid in 2009 are expected to result in annual dividend payments similar to that paid in 2008.


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Contractual Debt and Cash Obligations
 
The following table sets forth our fixed contractual debt and cash obligations as of December 31, 2008.
 
                                         
          Expiration per Period  
          Less Than
                After 5
 
Fixed Contractual Debt and Cash Obligations
  Total     1 Year     Years 2 & 3     Years 4 & 5     Years  
    (In $ millions)  
 
Term loans facility
    2,794       28       57       57       2,652  
Interest payments on debt(1)
    1,128       204       369       253       302  
Capital lease obligations
    211       11       41       23       136  
Other debt(2)
    530       194       91       58       187  
                                         
Fixed contractual debt obligations
    4,663       437       558       391       3,277  
Operating leases
    140       45       48       25       22  
Unconditional purchase obligations
    2,291       527       717       399       648  
FIN 48 obligations, including interest and penalties(3)
    218                         218  
Other contractual obligations
    165       47       35       18       65  
                                         
Fixed contractual debt and cash obligations
    7,477       1,056       1,358       833       4,230  
                                         
 
 
(1) Future interest expense is calculated using the rate in effect on January 2, 2009.
 
(2) Does not include a $2 million reduction due to purchase accounting.
 
(3) Due to uncertainties in the timing of the effective settlement of tax positions with the respective taxing authorities, we are unable to determine the timing of payments related to our Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (“FIN 48”) obligations, including interest and penalties. These amounts are therefore reflected in “After 5 Years”.
 
Other Debt.  Other debt of $530 million is primarily made up of fixed rate pollution control and industrial revenue bonds, short-term borrowings from affiliated companies and other bank obligations.
 
Unconditional Purchase Obligations.  Unconditional Purchase Obligations include take or pay contracts. We do not expect to incur any material losses under these contractual arrangements. In addition, these contracts may include variable price components.
 
Other Contractual Obligations.  Other Contractual Obligations primarily includes committed capital spending and fines associated with the US antitrust settlement described in Note 23 to the consolidated financial statements.
 
Contractual Guarantees and Commitments
 
As of December 31, 2008, we have contractual guarantees and commitments as follows:
 
                                         
          Expiration per Period  
          Less Than
                After 5
 
Contractual Guarantees and Commitments
  Total     1 Year     Years 2 & 3     Years 4 & 5     Years  
    (In $ millions)  
 
Financial guarantees
    26       8       16       2        
Standby letters of credit
    91       91                    
                                         
Contractual guarantees and commitments
    117       99       16       2        
                                         
 
We are secondarily liable under a lease agreement which we assigned to a third party. The lease expires on April 30, 2012. The lease liability for the period from January 1, 2009 to April 30, 2012 is estimated to be approximately $26 million.


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Standby letters of credit of $91 million outstanding as of December 31, 2008 are irrevocable obligations of an issuing bank that ensure payment to third parties in the event that certain subsidiaries fail to perform in accordance with specified contractual obligations. The likelihood is remote that material payments will be required under these agreements.
 
Other Obligations
 
Deferred Compensation.  In April 2007, certain participants in our 2004 deferred compensation plan elected to participate in a revised program, which includes both cash awards and restricted stock units. Under the revised program, participants relinquished their cash awards of up to $30 million that would have contingently accrued from 2007-2009 under the original plan. See additional discussion of the revised program in Note 20 to the consolidated financial statements. Based on current participation in the revised program, the awards aggregate to approximately $27 million plus notional earnings and will be recognized as expense through December 31, 2010. We expensed $8 million and $6 million during the years ended December 31, 2008 and 2007, respectively, related to the revised program.
 
In December 2008, we entered into time-vesting cash awards of $22 million with Celanese’s executive officers and certain other key employees. Each award of cash vests 30% on October 14, 2009, 30% on October 14, 2010 and 40% on October 14, 2011. In its sole discretion, the compensation committee of the Board of Directors may at any time convert all or a portion of the cash award to an award of time-vesting restricted stock units.
 
Pension and Other Postretirement Obligations.  Our contributions for pension and postretirement benefits are preliminarily estimated to be $40 million and $35 million, respectively, in 2009.
 
Domination Agreement.  The domination and profit and loss transfer agreement (the “Domination Agreement”) was approved at the Celanese GmbH, formerly known as Celanese AG, extraordinary shareholders’ meeting on July 31, 2004. The Domination Agreement between Celanese GmbH and the Purchaser became effective on October 1, 2004 and cannot be terminated by the Purchaser in the ordinary course of business until September 30, 2009. Our 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, we may not have sufficient funds for payments on our indebtedness when due. We have not had to compensate Celanese GmbH for an annual loss for any period during which the Domination Agreement has been in effect.
 
Purchases of Treasury Stock
 
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. During the year ended December 31, 2008, we repurchased 9,763,200 shares of our Series A common stock at an average purchase price of $38.68 per share for a total of approximately $378 million in connection with this authorization.
 
These purchases reduced the number of shares outstanding and the repurchased shares may be used by us for compensation programs utilizing our stock and other corporate purposes. We account for treasury stock using the cost method and include treasury stock as a component of Shareholders’ equity.
 
Plumbing Actions
 
We are involved in a number of legal proceedings and claims incidental to the normal conduct of our business. As of December 31, 2008 and 2007, there were reserves of $64 million and $65 million, respectively, related to plumbing action litigation. Although it is impossible at this time to determine with certainty the ultimate outcome of these matters, we believe, based on the advice of legal counsel, that adequate provisions have been made and that the


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ultimate outcome will not have a material adverse effect on our financial position, but could have a material adverse effect on our results of operations or cash flows in any given accounting period.
 
Off-Balance Sheet Arrangements
 
We have not entered into any material off-balance sheet arrangements.
 
Market Risks
 
Please see “Quantitative and Qualitative Disclosure about Market Risk” under Item 7A of this Form 10-K for additional information about our Market Risks.
 
Critical Accounting Policies and Estimates
 
Our consolidated financial statements are based on the selection and application of significant accounting policies. 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. Actual results could differ from those estimates. However, we are not currently aware of any reasonably likely events or circumstances that would result in materially different results.
 
We believe the following accounting polices and estimates are critical to understanding the financial reporting risks present in the current economic environment. These matters, and the judgments and uncertainties affecting them, are also essential to understanding our reported and future operating results. See Note 2 to the consolidated financial statements for a more comprehensive discussion of our significant accounting policies.
 
Recoverability of Long-Lived Assets
 
We assess the recoverability of long-lived assets, excluding goodwill and indefinite-lived intangible assets, whenever events or circumstances indicate that the carrying value of the long-lived asset may not be recoverable. Examples of a change in events or circumstances include, but are not limited to, a decrease in the market price of a long-lived asset, a history of cash flow losses related to the use of the long-lived asset or a significant adverse change in the extent or manner in which a long-lived asset is being used. To assess the recoverability of long-lived assets, excluding goodwill and indefinite-lived intangible assets, we compare the carrying amount of the long-lived asset or group of long-lived assets to the future net undiscounted cash flows expected to be generated by the long-lived asset or group of long-lived assets. If such long-lived assets are considered impaired, the impairment recognized is measured as the amount by which the carrying amount of the long-lived assets exceeds the fair value of the long-lived assets.
 
We assess the recoverability of the carrying value of our goodwill and other indefinite-lived intangible assets annually during the third quarter of our 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. Recoverability of goodwill and other indefinite-lived intangible assets is measured using a discounted cash flow model. We periodically engage a third-party valuation consultant to assist us with this process.
 
The development of future net undiscounted cash flow projections and the discounted cash flow projections require management projections related to sales and profitability trends, other future results of operations and discount rates. These projections, which require significant judgment, are consistent with projections we use to manage our operations internally. To the extent that changes in the current business environment result in adjusted management projections, impairment losses may occur in future periods.
 
Income Taxes
 
We regularly review our deferred tax assets for recoverability and establish a valuation allowance based on historical taxable income, projected future taxable income, applicable tax strategies, and the expected timing of the reversals of existing temporary differences. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Such evaluations require significant management


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judgments. Valuation allowances have been established primarily on net operating loss carryforwards and other deferred tax assets in the US, the United Kingdom and Canada.
 
We record accruals for income taxes and associated interest that may become payable in future years as a result of audits by tax authorities. We recognize tax benefits when it is more likely than not (likelihood of greater than 50%), based on technical merits, that the position will be sustained upon examination. Tax positions that meet the more-likely-than-not threshold are measured using a probability weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement. Whether the more-likely-than-not recognition threshold is met for a tax position is a matter of judgment based on the individual facts and circumstances of that position evaluated in light of all available evidence. The actual outcome of the future tax consequence could differ from our estimate due to changes in future circumstances and may have a material impact on our consolidated results of operations, financial position or cash flows.
 
Benefit Obligations
 
We have pension and other postretirement benefit plans covering substantially all employees who meet eligibility requirements. With respect to its US qualified defined benefit pension plan, minimum funding requirements are determined by the Employee Retirement Income Security Act based on years of service and/or compensation. Various assumptions are used in the calculation of the actuarial valuation of the employee benefit plans. These assumptions include the weighted average discount rate, compensation levels, expected long-term rates of return on plan assets and trends in health care costs. In addition to the above mentioned assumptions, actuarial consultants use subjective factors such as withdrawal and mortality rates to estimate the projected benefit obligation. The actuarial assumptions used may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. These differences may result in a significant impact to the amount of pension expense recorded in future periods.
 
The amounts recognized in the consolidated financial statements related to pension and other postretirement benefits are determined on an actuarial basis. A significant assumption used in determining our pension expense is the expected long-term rate of return on plan assets. As of December 31, 2008, we assumed an expected long-term rate of return on plan assets of 8.5% for the US qualified defined benefit pension plan, which represents approximately 83% and 78% of our pension plan assets and liabilities, respectively. On average, the actual return on these plan assets over the long-term (15 to 20 years) has exceeded 9.0%.
 
We estimate a 25 basis point decline in the expected long-term rate of return for the US qualified defined benefit pension plan to increase pension expense by an estimated $5 million in 2008. Another estimate that affects our pension and other postretirement benefit expense is the discount rate used in the annual actuarial valuations of pension and other postretirement benefit plan obligations. At the end of each year, we determine the appropriate discount rate, used to determine the present value of future cash flows currently expected to be required to settle the pension and other postretirement benefit obligations. The discount rate is generally based on the yield on high-quality corporate fixed-income securities. As of December 31, 2008, we increased the discount rate to 6.50% from 6.30% as of December 31, 2007 for the US plans. We estimate that a 50 basis point decline in our discount rate will decrease our annual pension expenses by an estimated $1 million, and increase our benefit obligations by approximately $144 million for our US pension plan. In addition, the same basis point decline in our discount rate will also increase our annual expenses and benefit obligations by less than $1 million and $8 million respectively, for our US postretirement medical plans. We estimate that a 50 basis point decline in the discount rate for the non-US pension and postretirement medical plans will increase pension and other postretirement benefit annual expenses by approximately $1 million and less than $1 million, respectively, and will increase our benefit obligations by approximately $30 million and $2 million, respectively.
 
Other postretirement benefit plans provide medical and life insurance benefits to retirees who meet minimum age and service requirements. The key determinants of the accumulated postretirement benefit obligation (“APBO”) are the discount rate and the healthcare cost trend rate. The healthcare cost trend rate has a significant effect on the reported amounts of APBO and related expense. For example, increasing or decreasing the healthcare cost trend rate by one percentage point in each year would result in the APBO as of December 31, 2008, and the 2008 postretirement benefit cost to change by approximately $3 million and $(3) million, respectively. See Note 15 to the consolidated financial statements for additional information.


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Accounting for Commitments and Contingencies
 
We are subject to a number of legal proceedings, lawsuits, claims, and investigations, incidental to the normal conduct of our business, relating to and including product liability, patent and intellectual property, commercial, contract, antitrust, past waste disposal practices, release of chemicals into the environment and employment matters, which are handled and defended in the ordinary course of business. We routinely assess the likelihood of any adverse judgments or outcomes to these matters as well as ranges of probable and reasonably estimable losses. Reasonable estimates involve judgments made by us after considering a broad range of information including: notifications, demands, settlements which have been received from a regulatory authority or private party, estimates performed by independent consultants and outside counsel, available facts, identification of other potentially responsible parties and their ability to contribute, as well as prior experience. With respect to environmental liabilities, it is our policy to accrue through fifteen years, unless we have government orders or other agreements that extend beyond fifteen years. A determination of the amount of loss contingency required, if any, is assessed in accordance with FASB Statement of Financial Accounting Standards No. 5, Contingencies and Commitments, and recorded if probable and estimable after careful analysis of each individual matter. The required reserves may change in the future due to new developments in each matter and as additional information becomes available.
 
Financial Reporting Changes
 
See Note 3 to the consolidated financial statements for information regarding recent accounting pronouncements.
 
Item 7A.   Quantitative and Qualitative Disclosures about Market Risk
 
Market Risks
 
Our financial market risk consists principally of exposure to currency exchange rates, interest rates and commodity prices. Exchange rate and interest rate risks are managed with a variety of techniques, including use of derivatives. We have in place policies of hedging against changes in currency exchange rates, interest rates and commodity prices as described below. Contracts to hedge exposures are primarily accounted for under Statement of Financial Accounting Standards (“SFAS”) No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS No. 133”) amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities and SFAS No. 148, Amendment of Statement 133 on Derivative Instruments and Hedging Activities.
 
Interest Rate Risk Management
 
We use interest rate swap agreements to manage the interest rate risk of our total debt portfolio and related overall cost of borrowing. To reduce the interest rate risk inherent in our variable rate debt, we utilize interest rate swap agreements to convert a portion of our variable rate debt to a fixed rate obligation. These interest rate swap agreements are designated as cash flow hedges.
 
In March 2007, in anticipation of the April 2007 debt refinancing, we entered into various US dollar and Euro interest rate swap agreements, which became effective on April 2, 2007, with notional amounts of $1.6 billion and €150 million, respectively. The notional amount of the $1.6 billion US dollar interest rate swaps decreased by $400 million effective January 2, 2008 and decreased by another $200 million effective January 2, 2009. To offset the declines, we entered into US dollar interest rate swaps with a combined notional amount of $400 million which became effective on January 2, 2008 and an additional US dollar interest rate swap with a notional amount of $200 million which will become effective April 2, 2009.
 
As of December 31, 2008, we had $2.3 billion, €454 million and CNY 1.5 billion of variable rate debt, of which $1.6 billion and €150 million is hedged with interest rate swaps, which leaves $674 million, €304 million and CNY 1.5 billion of variable rate debt subject to interest rate exposure. Accordingly, a 1% increase in interest rates would increase annual interest expense by approximately $13 million.
 
See Note 22 to the consolidated financial statements for further discussion of our interest rate risk management and the related impact on our financial position and results of operations.


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Foreign Exchange Risk Management
 
The primary business objective of this hedging program is to maintain an approximately balanced position in foreign currencies so that exchange gains and losses resulting from exchange rate changes, net of related tax effects, are minimized. It is our policy to minimize currency exposures and to conduct operations either within functional currencies or using the protection of hedge strategies. Accordingly, we enter into foreign currency forwards and swaps to minimize our exposure to foreign currency fluctuations. From time to time we may also hedge our currency exposure related to forecasted transactions. Forward contracts are not designated as hedges under SFAS No. 133.
 
The following table indicates the total US dollar equivalents of net foreign exchange exposure related to (short) long foreign exchange forward contracts outstanding by currency. All of the contracts included in the table below will have approximately offsetting effects from actual underlying payables, receivables, intercompany loans or other assets or liabilities subject to foreign exchange remeasurement.
 
         
    2009 Maturity  
    (In $ millions)  
 
Currency
       
Euro
    145  
British pound sterling
    (115 )
Mexican peso
    80  
Singapore dollar
    26  
Canadian dollar
    21  
Japanese yen
    9  
Brazilian real
    (7 )
Swedish krona
    6  
Hungarian forint
    (5 )
Other
    (3 )
         
Total
    157  
         
 
Additionally, a portion of our assets, liabilities, revenues and expenses are denominated in currencies other than the US dollar, principally the Euro. Fluctuations in the value of these currencies against the US dollar, particularly the value of the Euro, can have a direct and material impact on the business and financial results. For example, a decline in the value of the Euro versus the US dollar results in a decline in the US dollar value of our sales and earnings denominated in Euros due to translation effects. Likewise, an increase in the value of the Euro versus the US dollar would result in an opposite effect.
 
To protect the foreign currency exposure of a net investment in a foreign operation, we 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. We dedesignated the net investment hedge due to the debt refinancing in April 2007 and redesignated the cross currency swaps and new senior EURO term loan in July 2007. As a result, we recorded $26 million of mark-to-market losses related to the cross currency swaps and the new senior Euro term loan during this period.
 
Under the terms of the cross currency swap arrangements, we paid approximately €13 million in interest and received approximately $16 million in interest on June 15 and December 15 of each year. The fair value of the net obligation under the cross currency swaps was included in current Other liabilities in the consolidated balance sheets as of December 31, 2007. Upon maturity of the cross currency swap arrangements in June 2008, we owed €276 million ($426 million) and were owed $333 million. In settlement of the obligation, we paid $93 million (net of interest of $3 million) in June 2008.
 
During the year ended December 31, 2008, we dedesignated €385 million of the €400 million euro-denominated portion of the term loan, previously designated as a hedge of a net investment of a foreign operation. Prior to this dedesignation, we had been using external derivative contracts to offset foreign currency exposures on


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intercompany loans. The foreign currency exposure resulting from dedesignation of €385 million of the hedge of a net investment of a foreign operation is expected to offset the foreign currency exposure on certain intercompany loans, decreasing the need for external derivative contracts and reducing our exposure to external counterparties. The remaining €15 million euro-denominated portion of the term loan continues to be designated as a hedge of a net investment of a foreign operation.
 
See Note 22 to the consolidated financial statements for further discussion of our foreign exchange risk management and the related impact on our financial position and results of operations.
 
Commodity Risk Management
 
We have exposure to the prices of commodities in its procurement of certain raw materials. We manage its exposure primarily through the use of long-term supply agreements and derivative instruments. We regularly assess our practice of purchasing a portion of its commodity requirements forward and utilization of other raw material hedging instruments, in addition to forward purchase contracts, in accordance with changes in market conditions. Forward purchases and swap contracts for raw materials are principally settled through actual delivery of the physical commodity. For qualifying contracts, we have elected to apply the normal purchases and normal sales exception of SFAS No. 133, as amended, as it was probable at the inception and throughout the term of the contract that they would not settle net and would result in physical delivery. As such, realized gains and losses on these contracts are included in the cost of the commodity upon the settlement of the contract.
 
In addition, we occasionally enter into financial derivatives to hedge a component of a raw material or energy source. Typically, these types of transactions do not qualify for hedge accounting. These instruments are marked to market at each reporting period and gains (losses) are included in Cost of sales in the consolidated statements of operations. We recognized no gain or loss from these types of contracts during the year ended December 31, 2008 and less than $1 million during each of the years ended December 31, 2007 and 2006, respectively. As of December 31, 2008, we did not have any open financial derivative contracts for commodities.
 
Item 8.   Financial Statements and Supplementary Data
 
Our consolidated financial statements and supplementary data are included in pages F-2 through of this Annual Report on Form 10-K. See accompanying Item 15. Exhibits and Financial Statement Schedules and Index to the consolidated financial statements on page F-1.


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Quarterly Financial Information
 
CELANESE CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
 
                                 
    Three Months Ended  
    March 31,
    June 30,
    September 30,
    December 31,
 
    2008     2008     2008     2008  
    (Unaudited)  
    (In $ millions, except per share data)  
 
Net sales
    1,846       1,868       1,823       1,286  
Other (charges) gains, net
    (16 )     (7 )     (1 )     (84 )
Operating profit (loss)
    234       207       151       (152 )
Earnings (loss) from continuing operations before tax and minority interests
    218       247       152       (183 )
Earnings (loss) from continuing operations
    145       203       164       (140 )
Earnings (loss) from discontinued operations
          (69 )     (6 )     (15 )
Net earnings (loss)
    145       134       158       (155 )
Earnings (loss) per share — basic
    0.93       0.87       1.05       (1.09 )
Earnings (loss) per share — diluted
    0.87       0.80       0.97       (1.09 )
 
                                 
    Three Months Ended  
    March 31,
    June 30,
    September 30,
    December 31,
 
    2007     2007     2007     2007  
    (Unaudited)  
    (In $ millions, except per share data)  
 
Net sales
    1,555       1,556       1,573       1,760  
Other (charges) gains, net
    (1 )     (105 )     (12 )     60  
Operating profit
    206       71       147       324  
Earnings (loss) from continuing operations before tax and minority interests
    171       (168 )     131       313  
Earnings (loss) from continuing operations
    122       (124 )     130       208  
Earnings (loss) from discontinued operations
    79       7       (2 )     6  
Net earnings (loss)
    201       (117 )     128       214  
Earnings (loss) per share — basic
    1.25       (0.76 )     0.84       1.39  
Earnings (loss) per share — diluted
    1.15       (0.76 )     0.76       1.27  
 
For a discussion of material events affecting performance in each quarter, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. All amounts in the table above have been properly adjusted for the effects of discontinued operations.


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Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 
None.
 
Item 9A.   Controls and Procedures
 
Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, as of December 31, 2008, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.
 
Changes in Internal Control Over Financial Reporting
 
None.
 
REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
 
Our management is responsible for establishing and maintaining adequate internal controls over financial reporting for the Company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our consolidated financial statements; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our consolidated financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our consolidated financial statements would be prevented or detected.
 
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2008. KPMG LLP has audited this assessment of our internal control over financial reporting; their report is included below.


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
The Board of Directors and Shareholders
Celanese Corporation:
 
We have audited Celanese Corporation and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying report of management on internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
 
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the consolidated financial statements.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
In our opinion, Celanese Corporation and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
 
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Celanese Corporation and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations, shareholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2008, and our report dated February 12, 2009 expressed an unqualified opinion on those consolidated financial statements.
 
/s/  KPMG LLP
 
Dallas, Texas
February 12, 2009


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Item 9B.   Other Information
 
None.
 
PART III
 
Item 10.   Directors, Executive Officers and Corporate Governance
 
The information required by this Item 10 is incorporated herein by reference from the section captioned “Corporate Governance”, “Our Management Team,” and “Section 16(a) Beneficial Ownership Reporting Compliance” of the Company’s definitive proxy statement for the 2009 annual meeting of stockholders to be filed not later than March 23, 2009 with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “2009 Proxy Statement”).
 
Item 11.   Executive Compensation
 
The information required by this Item 11 is incorporated by reference from the section captioned “Executive Compensation” of the 2009 Proxy Statement.
 
Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 
The information required by this Item 12 is incorporated by reference from the section captioned “Stock Ownership Information” of the 2009 Proxy Statement. The information required by Item 201(d) of Regulation S-K is submitted in a separate section of this Form 10-K. See Item 5 — Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, above.
 
Item 13.   Certain Relationships and Related Transactions and Director Independence
 
The information required by this Item 13 is incorporated by reference from the section captioned “Certain Relationships and Related Party Transactions” of the 2009 Proxy Statement.
 
Item 14.   Principal Accounting Fees and Services
 
The information required by this Item 14 is incorporated by reference from the section captioned “Ratification of Independent Auditors — Audit and Related Fees” of the 2009 Proxy Statement.
 
PART IV
 
Item 15.   Exhibits and Financial Statement Schedule
 
1. Financial Statements. The reports of our independent registered public accounting firm and our consolidated financial statements are listed below and begin on page F-1 of this Annual Report on Form 10-K.
 
     
    Page Number
 
Report of Independent Registered Public Accounting Firm
  F-2
Consolidated Statements of Operations
  F-3
Consolidated Balance Sheets
  F-4
Consolidated Statements of Shareholders’ Equity and Comprehensive Income (Loss)
  F-5
Consolidated Statements of Cash Flows
  F-6
Notes to Consolidated Financial Statements
  F-7
 
2. Financial Statement Schedule.
 
The financial statement schedule required by this item is included as an Exhibit to this Annual Report on Form 10-K.
 
3. Exhibit List.


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See Index to Exhibits following our consolidated financial statements contained in this Annual Report on Form 10-K.
 
PLEASE NOTE:  It is inappropriate for readers to assume the accuracy of, or rely upon any covenants, representations or warranties that may be contained in agreements or other documents filed as Exhibits to, or incorporated by reference in, this Annual Report. Any such covenants, representations or warranties may have been qualified or superseded by disclosures contained in separate schedules or exhibits not filed with or incorporated by reference in this Annual Report, may reflect the parties’ negotiated risk allocation in the particular transaction, may be qualified by materiality standards that differ from those applicable for securities law purposes, and may not be true as of the date of this Annual Report or any other date and may be subject to waivers by any or all of the parties. Where exhibits and schedules to agreements filed or incorporated by reference as Exhibits hereto are not included in these exhibits, such exhibits and schedules to agreements are not included or incorporated by reference herein.


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SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
CELANESE CORPORATION
 
  By: 
/s/  David N. Weidman
Name:     David N. Weidman
  Title:  Chairman of the Board of
Directors and Chief Executive
Officer
 
Date: February 12, 2009
 
POWER OF ATTORNEY
 
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Steven M. Sterin, his true and lawful attorney-in-fact with power of substitution and resubstitution to sign in his name, place and stead, in any and all capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable under the Securities Exchange Act of 1934 and any rules, regulations and requirements of the US Securities and Exchange Commission in connection with the Annual Report on Form 10-K and any and all amendments hereto, as fully for all intents and purposes as he might or could do in person, and hereby ratifies and confirms said attorney-in-fact, acting alone, and his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.
 
             
Signature
 
Title
 
Date
 
         
/s/  David N. Weidman

David N. Weidman
  Chairman of the Board of Directors, Chief Executive Officer
(Principal Executive Officer)
  February 12, 2009
         
/s/  Steven M. Sterin

Steven M. Sterin
  Senior Vice President, Chief Financial Officer (Principal Financial Officer)   February 12, 2009
         
/s/  Miguel A. Desdin

Miguel A. Desdin
  Vice President, Controller
(Principal Accounting Officer)
  February 12, 2009
         
/s/  James E. Barlett

James E. Barlett
  Director   February 12, 2009
         
/s/  David F. Hoffmeister

David F. Hoffmeister
  Director   February 12, 2009
         
/s/  Martin G. McGuinn

Martin G. McGuinn
  Director   February 12, 2009


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Signature
 
Title
 
Date
 
         
/s/  Paul H. O’Neill

Paul H. O’Neill
  Director   February 12, 2009
         
/s/  Mark C. Rohr

Mark C. Rohr
  Director   February 12, 2009
         
/s/  Daniel S. Sanders

Daniel S. Sanders
  Director   February 12, 2009
         
/s/  Farah M. Walters

Farah M. Walters
  Director   February 12, 2009
         
/s/  John K. Wulff

John K. Wulff
  Director   February 12, 2009


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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
         
    Page
 
ANNUAL CELANESE CORPORATION CONSOLIDATED FINANCIAL STATEMENTS
       
    F-2  
    F-3  
    F-4  
    F-5  
    F-6  
       
    F-7  
    F-7  
    F-12  
    F-14  
    F-16  
    F-18  
    F-18  
    F-19  
    F-21  
    F-21  
    F-22  
    F-23  
    F-23  
    F-24  
    F-26  
    F-31  
    F-34  
    F-35  
    F-37  
    F-41  
    F-45  
    F-45  
    F-49  
    F-56  
    F-56  
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
The Board of Directors and Shareholders
Celanese Corporation:
 
We have audited the accompanying consolidated balance sheets of Celanese Corporation and subsidiaries (the “Company”) as of December 31, 2008 and 2007, and the related consolidated statements of operations, shareholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2008. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Celanese Corporation and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2008, in conformity with US generally accepted accounting principles.
 
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 12, 2009 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
 
As discussed in Note 22 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements, during the year ended December 31, 2008.
 
As discussed in Note 19 to the consolidated financial statements, the Company adopted Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes, during the year ended December 31, 2007.
 
As discussed in Note 15 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, during the year ended December 31, 2006.
 
As discussed in Note 20 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, during the year ended December 31, 2006.
 
/s/  KPMG LLP
 
Dallas, Texas
February 12, 2009


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CELANESE CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
 
                         
    Year Ended December 31,  
    2008     2007     2006  
    (In $ millions, except for share and per share data)  
 
Net sales
    6,823       6,444       5,778  
Cost of sales
    (5,567 )     (4,999 )     (4,469 )
                         
Gross profit
    1,256       1,445       1,309  
Selling, general and administrative expenses
    (540 )     (516 )     (536 )
Amortization of intangible assets (primarily customer relationships)
    (76 )     (72 )     (66 )
Research and development expenses
    (80 )     (73 )     (65 )
Other (charges) gains, net
    (108 )     (58 )     (10 )
Foreign exchange gain (loss), net
    (4 )     2       (3 )
Gain (loss) on disposition of businesses and assets, net
    (8 )     20       (9 )
                         
Operating profit
    440       748       620  
Equity in net earnings of affiliates
    54       82       76  
Interest expense
    (261 )     (262 )     (293 )
Refinancing expenses
          (256 )     (1 )
Interest income
    31       44       37  
Dividend income — cost investments
    167       116       79  
Other income (expense), net
    3       (25 )     8  
                         
Earnings (loss) from continuing operations before tax and minority interests
    434       447       526  
Income tax (provision) benefit
    (63 )     (110 )     (203 )
Minority interests
    1       (1 )     (4 )
                         
Earnings (loss) from continuing operations
    372       336       319  
Earnings (loss) from operation of discontinued operations
    (120 )     40       130  
Gain (loss) on disposal of discontinued operations
    6       52       5  
Income tax (provision) benefit, discontinued operations
    24       (2 )     (48 )
                         
Earnings (loss) from discontinued operations
    (90 )     90       87  
                         
Net earnings (loss)
    282       426       406  
                         
Cumulative preferred stock dividend
    (10 )     (10 )     (10 )
                         
Net earnings (loss) available to common shareholders
    272       416       396  
                         
Earnings (loss) per common share — basic:
                       
Continuing operations
    2.44       2.11       1.95  
Discontinued operations
    (0.61 )     0.58       0.55  
                         
Net earnings (loss) — basic
    1.83       2.69       2.50  
                         
Earnings (loss) per common share — diluted:
                       
Continuing operations
    2.28       1.96       1.86  
Discontinued operations
    (0.55 )     0.53       0.50  
                         
Net earnings (loss) — diluted
    1.73       2.49       2.36  
                         
Weighted average shares — basic
    148,350,273       154,475,020       158,597,424  
Weighted average shares — diluted
    163,471,873       171,227,997       171,807,599  
 
See the accompanying notes to the consolidated financial statements.


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CELANESE CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
 
                 
    As of December 31,  
    2008     2007  
    (In $ millions, except
 
    share amounts)  
 
ASSETS
Current assets
               
Cash and cash equivalents
    676       825  
Trade receivables — third party and affiliates (net of allowance for doubtful accounts — 2008: $25; 2007: $18)
    631       1,009  
Non-trade receivables
    328       437  
Inventories
    577       636  
Deferred income taxes
    24       70  
Marketable securities, at fair value
    6       46  
Other assets
    42       40  
                 
Total current assets
    2,284       3,063  
                 
Investments in affiliates
    789       814  
Property, plant and equipment (net of accumulated depreciation — 2008: $1,141; 2007: $838)
    2,472       2,362  
Deferred income taxes
    27       10  
Marketable securities, at fair value
    94       209  
Other assets
    357       309  
Goodwill
    779       866  
Intangible assets, net
    364       425  
                 
Total assets
    7,166       8,058  
                 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
               
Short-term borrowings and current installments of long-term debt — third party and affiliates
    233       272  
Trade payables — third party and affiliates
    523       818  
Other liabilities
    574       888  
Deferred income taxes
    15       30  
Income taxes payable
    24       23  
                 
Total current liabilities
    1,369       2,031  
                 
Long-term debt
    3,300       3,284  
Deferred income taxes
    122       265  
Uncertain tax positions
    218       220  
Benefit obligations
    1,167       696  
Other liabilities
    806       495  
Minority interests
    2       5  
Commitments and contingencies
               
Shareholders’ equity:
               
Preferred stock, $0.01 par value, 100,000,000 shares authorized (2008 and 2007: 9,600,000 issued and outstanding)
           
Series A common stock, $0.0001 par value, 400,000,000 shares authorized (2008: 164,107,394 issued and 143,505,708 outstanding; 2007: 162,941,287 issued and 152,102,801 outstanding)
           
Series B common stock, $0.0001 par value, 100,000,000 shares authorized (2008 and 2007: 0 shares issued and outstanding)
           
Treasury stock, at cost — (2008: 20,601,686 shares; 2007: 10,838,486 shares)
    (781 )     (403 )
Additional paid-in capital
    495       469  
Retained earnings
    1,047       799  
Accumulated other comprehensive income (loss), net
    (579 )     197  
                 
Total shareholders’ equity
    182       1,062  
                 
Total liabilities and shareholders’ equity
    7,166       8,058  
                 
 
See the accompanying notes to the consolidated financial statements.


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CELANESE CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)
 
                                                 
    2008     2007     2006  
    Shares
          Shares
          Shares
       
    Outstanding     Amount     Outstanding     Amount     Outstanding     Amount  
    (In $ millions, except share data)  
 
Preferred stock
                                               
Balance as of the beginning of the period
    9,600,000             9,600,000             9,600,000        
Issuance of preferred stock
                                   
                                                 
Balance as of the end of the period
    9,600,000             9,600,000             9,600,000        
                                                 
Series A common stock
                                               
Balance as of the beginning of the period
    152,102,801             158,668,666             158,562,161        
Issuance of Series A common stock
                7,400                    
Stock option exercises
    1,056,368             4,265,221             106,505        
Purchases of treasury stock
    (9,763,200 )           (10,838,486 )                  
Stock awards
    109,739                                
                                                 
Balance as of the end of the period
    143,505,708             152,102,801             158,668,666        
                                                 
Treasury stock
                                               
Balance as of the beginning of the period
    10,838,486       (403 )                        
Purchases of treasury stock, including related fees
    9,763,200       (378 )     10,838,486       (403 )            
                                                 
Balance as of the end of the period
    20,601,686       (781 )     10,838,486       (403 )            
                                                 
Additional paid-in capital
                                               
Balance as of the beginning of the period
            469               362               337  
Indemnification of demerger liability
            2               4               3  
Stock-based compensation, net of tax
            15               15               20  
Stock option exercises, net of tax
            10               88               2  
Restricted stock unit withholding
            (1 )                            
                                                 
Balance as of the end of the period
            495               469               362  
                                                 
Retained earnings
                                               
Balance as of the beginning of the period
            799               394               24  
Net earnings (loss)
            282               426               406  
Series A common stock dividends
            (24 )             (25 )             (26 )
Preferred stock dividends
            (10 )             (10 )             (10 )
Adoption of