Document
Table of Contents

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________
Form 10-Q
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2018
 
Or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Commission File Number) 001-32410
celanse_imagea01a34.gif
CELANESE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
98-0420726
(I.R.S. Employer
Identification No.)
 
 
222 W. Las Colinas Blvd., Suite 900N
Irving, TX
(Address of Principal Executive Offices)
75039-5421
(Zip Code)
(972) 443-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ  No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer  þ
Accelerated filer  o
Non-accelerated filer  o
Smaller reporting company  o
Emerging growth company  o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No þ
The number of outstanding shares of the registrant's common stock, $0.0001 par value, as of October 12, 2018 was 133,757,973.
 
 
 
 
 

Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
Form 10-Q
For the Quarterly Period Ended September 30, 2018
TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 

2

Table of Contents


Item 1. Financial Statements
CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
As Adjusted
 
 
 
As Adjusted
(Note 2)
 
(In $ millions, except share and per share data)
Net sales
1,771

 
1,566

 
5,466

 
4,547

Cost of sales
(1,255
)
 
(1,183
)
 
(3,914
)
 
(3,449
)
Gross profit
516

 
383

 
1,552

 
1,098

Selling, general and administrative expenses
(129
)
 
(133
)
 
(412
)
 
(353
)
Amortization of intangible assets
(5
)
 
(5
)
 
(18
)
 
(14
)
Research and development expenses
(18
)
 
(19
)
 
(54
)
 
(53
)
Other (charges) gains, net
12

 
—

 
9

 
(57
)
Foreign exchange gain (loss), net
—

 
4

 
2

 
—

Gain (loss) on disposition of businesses and assets, net
(2
)
 
(1
)
 
(4
)
 
(4
)
Operating profit (loss)
374

 
229

 
1,075

 
617

Equity in net earnings (loss) of affiliates
66

 
50

 
180

 
135

Non-operating pension and other postretirement employee benefit (expense) income
25


23

 
77

 
67

Interest expense
(30
)
 
(32
)
 
(95
)
 
(91
)
Interest income
2

 
1

 
4

 
2

Dividend income - cost investments
26

 
24

 
92

 
82

Other income (expense), net
(1
)
 
(6
)
 
3

 
(2
)
Earnings (loss) from continuing operations before tax
462

 
289

 
1,336

 
810

Income tax (provision) benefit
(54
)
 
(57
)
 
(216
)
 
(153
)
Earnings (loss) from continuing operations
408

 
232

 
1,120

 
657

Earnings (loss) from operation of discontinued operations
(7
)
 
(5
)
 
(9
)
 
(14
)
Income tax (provision) benefit from discontinued operations
1

 
1

 
1

 
2

Earnings (loss) from discontinued operations
(6
)
 
(4
)
 
(8
)
 
(12
)
Net earnings (loss)
402

 
228

 
1,112

 
645

Net (earnings) loss attributable to noncontrolling interests
(1
)
 
(2
)
 
(4
)
 
(5
)
Net earnings (loss) attributable to Celanese Corporation
401

 
226

 
1,108

 
640

Amounts attributable to Celanese Corporation
 

 
 

 
 

 
 

Earnings (loss) from continuing operations
407

 
230

 
1,116

 
652

Earnings (loss) from discontinued operations
(6
)
 
(4
)
 
(8
)
 
(12
)
Net earnings (loss)
401

 
226

 
1,108

 
640

Earnings (loss) per common share - basic
 

 
 

 
 

 
 

Continuing operations
3.02

 
1.68

 
8.25

 
4.71

Discontinued operations
(0.04
)
 
(0.03
)
 
(0.06
)
 
(0.09
)
Net earnings (loss) - basic
2.98

 
1.65

 
8.19

 
4.62

Earnings (loss) per common share - diluted
 

 
 

 
 

 
 

Continuing operations
3.00

 
1.68

 
8.18

 
4.69

Discontinued operations
(0.04
)
 
(0.03
)
 
(0.06
)
 
(0.09
)
Net earnings (loss) - diluted
2.96

 
1.65

 
8.12

 
4.60

Weighted average shares - basic
134,519,301

 
136,579,077

 
135,336,704

 
138,599,330

Weighted average shares - diluted
135,499,390

 
136,951,923

 
136,387,703

 
138,988,321

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

3

Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
 
(In $ millions)
Net earnings (loss)
402

 
228

 
1,112

 
645

Other comprehensive income (loss), net of tax


 


 


 
 
Unrealized gain (loss) on marketable securities
—

 
—

 
—

 
1

Foreign currency translation gain (loss)
(35
)
 
42

 
(52
)
 
148

Gain (loss) on cash flow hedges
4

 
—

 
9

 
(1
)
Pension and postretirement benefits gain (loss)
—

 
(1
)
 
1

 
4

Total other comprehensive income (loss), net of tax
(31
)
 
41

 
(42
)
 
152

Total comprehensive income (loss), net of tax
371

 
269

 
1,070

 
797

Comprehensive (income) loss attributable to noncontrolling interests
(1
)
 
(2
)
 
(4
)
 
(5
)
Comprehensive income (loss) attributable to Celanese Corporation
370

 
267

 
1,066

 
792


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

4

Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions, except share data)
ASSETS
 
 
 
Current Assets
 

 
 

Cash and cash equivalents (variable interest entity restricted - 2018: $27; 2017: $19)
703

 
576

Trade receivables - third party and affiliates (net of allowance for doubtful accounts - 2018: $10; 2017: $9; variable interest entity restricted - 2018: $5; 2017: $5)
1,086

 
986

Non-trade receivables, net
279

 
244

Inventories
1,033

 
900

Marketable securities, at fair value
31

 
32

Other assets
48

 
54

Total current assets
3,180

 
2,792

Investments in affiliates
981

 
976

Property, plant and equipment (net of accumulated depreciation - 2018: $2,739; 2017: $2,584; variable interest entity restricted - 2018: $668; 2017: $697)
3,699

 
3,762

Deferred income taxes
170

 
366

Other assets (variable interest entity restricted - 2018: $4; 2017: $6)
413

 
338

Goodwill
1,064

 
1,003

Intangible assets (variable interest entity restricted - 2018: $23; 2017: $25)
317

 
301

Total assets
9,824

 
9,538

LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 

 
 

Short-term borrowings and current installments of long-term debt - third party and affiliates
229

 
326

Trade payables - third party and affiliates
819

 
807

Other liabilities
347

 
354

Income taxes payable
137

 
72

Total current liabilities
1,532

 
1,559

Long-term debt, net of unamortized deferred financing costs
3,196

 
3,315

Deferred income taxes
246

 
211

Uncertain tax positions
154

 
156

Benefit obligations
547

 
585

Other liabilities
206

 
413

Commitments and Contingencies


 


Stockholders' Equity
 

 
 

Preferred stock, $0.01 par value, 100,000,000 shares authorized (2018 and 2017: 0 issued and outstanding)
—

 
—

Common stock, $0.0001 par value, 400,000,000 shares authorized (2018: 168,299,980 issued and 133,731,509 outstanding; 2017: 168,156,969 issued and 135,769,256 outstanding)
—

 
—

Treasury stock, at cost (2018: 34,568,471 shares; 2017: 32,387,713 shares)
(2,281
)
 
(2,031
)
Additional paid-in capital
222

 
175

Retained earnings
5,819

 
4,920

Accumulated other comprehensive income (loss), net
(219
)
 
(177
)
Total Celanese Corporation stockholders' equity
3,541

 
2,887

Noncontrolling interests
402

 
412

Total equity
3,943

 
3,299

Total liabilities and equity
9,824

 
9,538


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

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Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENT OF EQUITY
 
Nine Months Ended
September 30, 2018
 
Shares
 
Amount
 
(In $ millions, except share data)
Common Stock
 
 
 
Balance as of the beginning of the period
135,769,256

 
—

Stock option exercises
—

 
—

Purchases of treasury stock
(2,180,758
)
 
—

Stock awards
143,011

 
—

Balance as of the end of the period
133,731,509

 
—

Treasury Stock
 
 
 
Balance as of the beginning of the period
32,387,713

 
(2,031
)
Purchases of treasury stock, including related fees
2,180,758

 
(250
)
Balance as of the end of the period
34,568,471

 
(2,281
)
Additional Paid-In Capital
 
 
 
Balance as of the beginning of the period
 
 
175

Stock-based compensation, net of tax
 
 
47

Balance as of the end of the period
 
 
222

Retained Earnings
 
 
 
Balance as of the beginning of the period
 
 
4,920

Net earnings (loss) attributable to Celanese Corporation
 
 
1,108

Common stock dividends
 
 
(209
)
Balance as of the end of the period
 
 
5,819

Accumulated Other Comprehensive Income (Loss), Net
 
 
 
Balance as of the beginning of the period
 
 
(177
)
Other comprehensive income (loss), net of tax
 
 
(42
)
Balance as of the end of the period
 
 
(219
)
Total Celanese Corporation stockholders' equity
 
 
3,541

Noncontrolling Interests
 
 
 
Balance as of the beginning of the period
 
 
412

Net earnings (loss) attributable to noncontrolling interests
 
 
4

(Distributions to) contributions from noncontrolling interests
 
 
(14
)
Balance as of the end of the period
 
 
402

Total equity
 
 
3,943


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

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Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Nine Months Ended
September 30,
 
2018
 
2017
 
(In $ millions)
Operating Activities
 
 
 
Net earnings (loss)
1,112

 
645

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities
 
 
 
Depreciation, amortization and accretion
258

 
231

Pension and postretirement net periodic benefit cost
(69
)
 
(60
)
Pension and postretirement contributions
(35
)
 
(36
)
Deferred income taxes, net
43

 
(5
)
(Gain) loss on disposition of businesses and assets, net
5

 
4

Stock-based compensation
53

 
32

Undistributed earnings in unconsolidated affiliates
(19
)
 
(19
)
Other, net
18

 
8

Operating cash provided by (used in) discontinued operations
4

 
7

Changes in operating assets and liabilities
 
 
 
Trade receivables - third party and affiliates, net
(114
)
 
(122
)
Inventories
(142
)
 
(14
)
Other assets
(60
)
 
(24
)
Trade payables - third party and affiliates
44

 
41

Other liabilities
97

 
57

Net cash provided by (used in) operating activities
1,195

 
745

Investing Activities
 
 
 
Capital expenditures on property, plant and equipment
(244
)
 
(180
)
Acquisitions, net of cash acquired
(144
)
 
(269
)
Proceeds from sale of businesses and assets, net
13

 
1

Other, net
(34
)
 
(9
)
Net cash provided by (used in) investing activities
(409
)
 
(457
)
Financing Activities
 
 
 
Net change in short-term borrowings with maturities of 3 months or less
(86
)
 
224

Proceeds from short-term borrowings
44

 
150

Repayments of short-term borrowings
(62
)
 
(91
)
Proceeds from long-term debt
—

 
—

Repayments of long-term debt
(56
)
 
(65
)
Purchases of treasury stock, including related fees
(250
)
 
(500
)
Stock option exercises
—

 
1

Common stock dividends
(209
)
 
(178
)
(Distributions to) contributions from noncontrolling interests
(14
)
 
(18
)
Other, net
(6
)
 
(19
)
Net cash provided by (used in) financing activities
(639
)
 
(496
)
Exchange rate effects on cash and cash equivalents
(20
)
 
31

Net increase (decrease) in cash and cash equivalents
127

 
(177
)
Cash and cash equivalents as of beginning of period
576

 
638

Cash and cash equivalents as of end of period
703

 
461


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

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Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. Description of the Company and Basis of Presentation
Description of the Company
Celanese Corporation and its subsidiaries (collectively, the "Company") is a global technology and specialty materials company. The Company's business involves processing chemical raw materials, such as methanol, carbon monoxide and ethylene, and natural products, including wood pulp, into value-added chemicals, thermoplastic polymers and other chemical-based products.
Definitions
In this Quarterly Report on Form 10-Q ("Quarterly Report"), the term "Celanese" refers to Celanese Corporation, a Delaware corporation, and not its subsidiaries. The term "Celanese US" refers to the Company's subsidiary, Celanese US Holdings LLC, a Delaware limited liability company, and not its subsidiaries.
Basis of Presentation
The unaudited interim consolidated financial statements for the three and nine months ended September 30, 2018 and 2017 contained in this Quarterly Report were prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") for all periods presented and include the accounts of the Company, its majority owned subsidiaries over which the Company exercises control and, when applicable, variable interest entities in which the Company is the primary beneficiary. The unaudited interim consolidated financial statements and other financial information included in this Quarterly Report, unless otherwise specified, have been presented to separately show the effects of discontinued operations.
In the opinion of management, the accompanying unaudited consolidated balance sheets and related unaudited interim consolidated statements of operations, comprehensive income (loss), cash flows and equity include all adjustments, consisting only of normal recurring items necessary for their fair presentation in conformity with US GAAP. Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted in accordance with rules and regulations of the Securities and Exchange Commission ("SEC"). These unaudited interim consolidated financial statements should be read in conjunction with the Company's consolidated financial statements as of and for the year ended December 31, 2017, filed on February 9, 2018 with the SEC as part of the Company's Annual Report on Form 10-K.
Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the entire year.
In the ordinary course of business, the Company enters into contracts and agreements relative to a number of topics, including acquisitions, dispositions, joint ventures, supply agreements, product sales and other arrangements. The Company endeavors to describe those contracts or agreements that are material to its business, results of operations or financial position. The Company may also describe some arrangements that are not material but in which the Company believes investors may have an interest or which may have been included in a Form 8-K filing. Investors should not assume the Company has described all contracts and agreements relative to the Company's business in this Quarterly Report.
For those consolidated ventures in which the Company owns or is exposed to less than 100% of the economics, the outside stockholders' interests are shown as noncontrolling interests.
During the three months ended March 31, 2018, the Company settled its dispute concerning the exercise of an option right by a partner in two of the Company's InfraServ equity affiliate investments. As a result of the settlement, the Company's ownership in InfraServ GmbH & Co. Gendorf KG and InfraServ GmbH & Co. Knapsack KG was reduced from 39% and 27%, to 30% and 22%, respectively.
The Company has reclassified certain prior period amounts primarily due to (1) the adoption of ASU 2017-07 (defined below in Note 2) and (2) to conform to the presentation of the Company's current reportable segments (Note 19).

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Table of Contents

Estimates and Assumptions
The preparation of unaudited interim consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited interim consolidated financial statements and the reported amounts of Net sales, expenses and allocated charges during the reporting period. Significant estimates pertain to impairments of goodwill, intangible assets and other long-lived assets, purchase price allocations, restructuring costs and other (charges) gains, net, income taxes, pension and other postretirement benefits, asset retirement obligations, environmental liabilities and loss contingencies, among others. Actual results could differ from those estimates.
2. Recent Accounting Pronouncements
The following table provides a brief description of recent Accounting Standard Updates ("ASU") issued by the Financial Accounting Standards Board ("FASB"):
Standard
 
Description
 
Effective Date
 
Effect on the Financial Statements or Other Significant Matters
 
 
 
 
 
 
 
In August 2018, the FASB issued ASU 2018-14, Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans.
 
The new guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing disclosures that no longer are considered cost beneficial, clarifying the specific requirements of disclosures and adding disclosure requirements identified as relevant.
 
January 1, 2020. Early adoption is permitted.
 
The Company is currently evaluating the impact of adoption on its financial statement disclosures.
 
 
 
 
 
 
 
In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.
 
The new guidance allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users.
 
January 1, 2019. Early adoption is permitted.
 
The Company is currently evaluating the impact of adoption on its financial statements and related disclosures.
 
 
 
 
 
 
 
In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities.
 
The new guidance improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results.
 
January 1, 2019. Early adoption is permitted.
 
The Company adopted the new guidance effective January 1, 2018, as part of the FASB's simplification initiative. The adoption of the new guidance did not have a material impact to the Company.
 
 
 
 
 
 
 
In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.
 
The new guidance clarifies the presentation and classification of the components of net periodic benefit costs in the consolidated statement of operations.
 
January 1, 2018.
 
The Company adopted the new guidance effective January 1, 2018, using the retrospective transition method, as part of the FASB's simplification initiative. See Adoption of ASU 2017-07 section below for additional information.
 
 
 
 
 
 
 
In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory.
 
The new guidance requires the income tax consequences of an intra-entity transfer of assets other than inventory to be recognized when the transfer occurs rather than deferring until an outside sale has occurred.
 
January 1, 2018.
 
The Company adopted the new guidance effective January 1, 2018, as part of the FASB's simplification initiative. The adoption of the new guidance did not have a material impact to the Company.
 
 
 
 
 
 
 
In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments.
 
The new guidance clarifies the presentation and classification of certain cash receipts and cash payments in the statement of cash flows.
 
January 1, 2018.
 
The Company adopted the new guidance effective January 1, 2018, as part of the FASB's simplification initiative. The adoption of the new guidance did not have a material impact to the Company.
 
 
 
 
 
 
 

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Table of Contents

Standard
 
Description
 
Effective Date
 
Effect on the Financial Statements or Other Significant Matters
 
 
 
 
 
 
 
In February 2016, the FASB issued ASU 2016-02, Leases. Since that date, the FASB has issued additional ASUs clarifying certain aspects of ASU 2016-02.
 
The new guidance supersedes the lease guidance under FASB Accounting Standards Codification ("ASC") Topic 840, Leases, resulting in the creation of FASB ASC Topic 842, Leases. The guidance requires a lessee to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for both finance and operating leases. Subsequent guidance issued after February 2016 did not change the core principle of ASU 2016-02.
 
January 1, 2019. Early adoption is permitted.
 
The Company has substantially completed evaluating its population of leases, and the most significant impact relates to its accounting for manufacturing and logistics equipment, and real estate operating leases. The Company currently anticipates recognition of additional assets and corresponding liabilities related to leases in the range of $150 - $200 million upon adoption. The Company plans to adopt the standard effective January 1, 2019, utilizing the modified retrospective transition method.
 
 
 
 
 
 
 
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities.
 
The new guidance updates certain aspects of recognition, measurement, presentation and disclosure of financial instruments.
 
January 1, 2018.
 
The Company adopted the new guidance effective January 1, 2018, using the modified retrospective approach, as part of the FASB's simplification initiative. The new guidance resulted in a cumulative-effect adjustment of less than $1 million to January 1, 2018 Retained earnings.
 
 
 
 
 
 
 
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. Since that date, the FASB has issued additional ASUs clarifying certain aspects of ASU 2014-09.
 
The new guidance requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The new guidance provides alternative methods of adoption. Subsequent guidance issued after May 2014 did not change the core principle of ASU 2014-09.
 
January 1, 2018.
 
The Company adopted the new guidance effective January 1, 2018, using the modified retrospective approach, as part of the FASB's simplification initiative. The adoption of the new guidance resulted in less than $1 million impact to the consolidated financial statements and related disclosures (See Note 20).
 
 
 
 
 
 
 
Adoption of ASU 2017-07
ASU 2017-07 requires an entity to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the statement of operations separately from the service cost component and outside a subtotal of Operating profit (loss). The new guidance represents a change in accounting principle. The Company adopted ASU 2017-07 on January 1, 2018 using the retrospective transition method. The adoption of this accounting standard resulted in a change in certain previously reported amounts, as follows:
 
Three Months Ended September 30, 2017
 
As previously reported
 
Adoption of ASU 2017-07
 
As Adjusted
 
(In $ millions)
Cost of sales
(1,181
)
 
(2
)
 
(1,183
)
Selling, general and administrative expenses
(112
)
 
(21
)
 
(133
)
Operating profit (loss)
252

 
(23
)
 
229

Non-operating pension and other postretirement employee benefit (expense) income
—

 
23

 
23


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Table of Contents

 
Nine Months Ended September 30, 2017
 
As previously reported
 
Adoption of ASU 2017-07
 
As Adjusted
 
(In $ millions)
Cost of sales
(3,443
)
 
(6
)
 
(3,449
)
Selling, general and administrative expenses
(291
)
 
(62
)
 
(353
)
Other (charges) gains, net
(58
)
 
1

 
(57
)
Operating profit (loss)
684

 
(67
)
 
617

Non-operating pension and other postretirement employee benefit (expense) income
—

 
67

 
67

The adoption of this accounting standard had no impact on the previously reported Earnings (loss) from continuing operations or Net earnings (loss) for this period.
3. Acquisitions, Dispositions and Plant Closures
Acquisitions
•
Omni Plastics
On February 1, 2018, using cash on hand and borrowings under the Company's senior unsecured revolving credit facility, the Company acquired 100% of the ownership interests of Omni Plastics, L.L.C. and its subsidiaries ("Omni Plastics"). Omni Plastics specializes in custom compounding of various engineered thermoplastic materials. The acquisition further strengthens the Company's global asset base by adding compounding capacity in the Americas. The acquisition was accounted for as a business combination and the acquired operations are included in the Engineered Materials segment.
Pro forma financial information since the respective acquisition date has not been provided as the acquisition did not have a material impact on the Company's financial information. The Company allocated the purchase price of the acquisition to identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The excess of the purchase price over the aggregate fair values was recorded as goodwill. The Company calculated the fair value of the assets acquired using the income, market or cost approach (or a combination thereof). Fair values were determined based on Level 3 inputs including estimated future cash flows, discount rates, royalty rates, growth rates, sales projections, retention rates and terminal values, all of which require significant management judgment and are susceptible to change. The purchase price allocation is based upon preliminary information and is subject to change if additional information about the facts and circumstances that existed at the acquisition date becomes available. The final fair value of the net assets acquired may result in adjustments to the assets and liabilities, including goodwill. However, any subsequent measurement period adjustments are not expected to have a material impact on the Company's results of operations.

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Table of Contents

The preliminary purchase price allocation for the Omni Plastics acquisition is as follows:
 
As of
February 1, 2018
 
(In $ millions)
Cash and cash equivalents
2

Trade receivables - third party and affiliates
12

Inventories
13

Property, plant and equipment, net
19

Intangible assets (Note 7)
35

Goodwill(1) (Note 7)
84

Other assets
1

Total fair value of assets acquired
166

 
 
Trade payables - third party and affiliates
(8
)
Total debt
(12
)
Total fair value of liabilities assumed
(20
)
Net assets acquired
146

______________________________
(1) 
Goodwill consists of expected revenue and operating synergies resulting from the acquisition, all of which is deductible for income tax purposes.
The amount of pro forma Net earnings (loss) of Omni Plastics included in the Company's unaudited interim consolidated statement of operations was less than 1% (unaudited) of its consolidated Net earnings (loss) had the acquisition occurred as of the beginning of 2018. The amount of Omni Plastics' Net earnings (loss) consolidated by the Company since the acquisition date was not material.
•
Acetate Tow Joint Venture
In June 2017, Celanese, through various subsidiaries, entered into an agreement with affiliates of The Blackstone Group L.P. (the "Blackstone Entities") to form a joint venture which would combine substantially all of the operations of the Company's cellulose derivatives business and the operations of the Rhodia Acetow cellulose acetate business formerly operated by Solvay S.A. and acquired by the Blackstone Entities in June 2017. The parties were subsequently unable to reach an agreement with the European Commission on acceptable conditions to allow the proposed joint venture to proceed. The demands by the European Commission eliminated the advantages at the heart of the transaction. As a result, on March 19, 2018, the Company and the Blackstone Entities abandoned their agreement to form the proposed joint venture.
•
Nilit Plastics
In May 2017, using cash on hand and borrowings under the Company's senior unsecured revolving credit facility, the Company acquired the nylon compounding division of Nilit Group ("Nilit"), an independent producer of high performance nylon resins, fibers and compounds. Celanese acquired the nylon compounding product portfolio, customer agreements and manufacturing, technology and commercial facilities. The acquisition of Nilit increases the Company's global engineered materials product platforms, extends the operational model, technical and industry solutions capabilities and expands project pipelines. The acquisition was accounted for as a business combination and the acquired operations are included in the Engineered Materials segment. The Company allocated the purchase price of the acquisition to identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The purchase price allocation was based on preliminary information. During the measurement period, the Company made certain adjustments to its purchase price allocation to adjust taxes and working capital, which resulted in a $2 million reduction to goodwill initially recorded.

12

Table of Contents

Plant Closures
•
Ocotlán, Mexico
On June 6, 2018, the Company announced the consolidation of its global acetate manufacturing operations by initiating the closure of its acetate tow manufacturing unit in Ocotlán, Mexico in 2018. The acetate flake unit will remain operational and is unaffected by these actions. The Ocotlán, Mexico operations are included in the Company's Acetate Tow segment.
The exit costs and shutdown costs related to the closure of the Ocotlán, Mexico acetate tow manufacturing unit (Note 14) are as follows:
 
Nine Months Ended
September 30, 2018
 
(In $ millions)
Restructuring(1)
2

Accelerated depreciation expense
12

Loss on disposition of assets, net
1

Total
15

______________________________
(1) 
Included in Other (charges) gains, net in the unaudited interim consolidated statement of operations.
The Company expects to incur additional exit and shutdown costs of approximately $5 million, primarily related to accelerated depreciation, through the remainder of 2018.
4. Ventures and Variable Interest Entities
Consolidated Variable Interest Entities
The Company has a joint venture, Fairway Methanol LLC ("Fairway"), with Mitsui & Co., Ltd., of Tokyo, Japan ("Mitsui"), in which the Company owns 50% of Fairway, for the production of methanol at the Company's integrated chemical plant in Clear Lake, Texas. The methanol unit utilizes natural gas in the US Gulf Coast region as a feedstock and benefits from the existing infrastructure at the Company's Clear Lake facility. Both Mitsui and the Company supply their own natural gas to Fairway in exchange for methanol tolling under a cost-plus off-take arrangement.
The Company determined that Fairway is a variable interest entity ("VIE") in which the Company is the primary beneficiary. Under the terms of the joint venture agreements, the Company provides site services and day-to-day operations for the methanol facility. In addition, the joint venture agreements provide that the Company indemnifies Mitsui for environmental obligations that exceed a specified threshold, as well as an equity option between the partners. Accordingly, the Company consolidates the venture and records a noncontrolling interest for the share of the venture owned by Mitsui. Fairway is included in the Company's Acetyl Intermediates segment.

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Table of Contents

The carrying amount of the assets and liabilities associated with Fairway included in the unaudited consolidated balance sheets are as follows:
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Cash and cash equivalents
27

 
19

Trade receivables, net - third party and affiliate
10

 
9

Property, plant and equipment (net of accumulated depreciation - 2018: $120; 2017: $90)
668

 
697

Intangible assets (net of accumulated amortization - 2018: $3; 2017: $2)
23

 
25

Other assets
4

 
6

Total assets(1)
732

 
756

 
 
 
 
Trade payables
13

 
16

Other liabilities(2)
4

 
4

Total debt
5

 
5

Deferred income taxes
3

 
3

Total liabilities
25

 
28

______________________________
(1) 
Assets can only be used to settle the obligations of Fairway.
(2) 
Primarily represents amounts owed by Fairway to the Company for reimbursement of expenditures.
Nonconsolidated Variable Interest Entities
The Company holds variable interests in entities that supply certain raw materials and services to the Company. The variable interests primarily relate to cost-plus contractual arrangements with the suppliers and recovery of capital expenditures for certain plant assets plus a rate of return on such assets. Liabilities for such supplier recoveries of capital expenditures have been recorded as capital lease obligations. The entities are not consolidated because the Company is not the primary beneficiary of the entities as it does not have the power to direct the activities of the entities that most significantly impact the entities' economic performance. The Company's maximum exposure to loss as a result of its involvement with these VIEs as of September 30, 2018, relates primarily to the recovery of capital expenditures for certain property, plant and equipment.
The carrying amount of the assets and liabilities associated with the obligations to nonconsolidated VIEs, as well as the maximum exposure to loss relating to these nonconsolidated VIEs are as follows:
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Property, plant and equipment, net
46

 
53

 
 
 
 
Trade payables
29

 
25

Current installments of long-term debt
13

 
18

Long-term debt
62

 
76

Total liabilities
104

 
119

 
 
 
 
Maximum exposure to loss
141

 
164

The difference between the total liabilities associated with obligations to nonconsolidated VIEs and the maximum exposure to loss primarily represents take-or-pay obligations for services included in the Company's unconditional purchase obligations (Note 18).

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Table of Contents

5. Marketable Securities, at Fair Value
The Company's nonqualified trusts hold available-for-sale securities for funding requirements of the Company's nonqualified pension plans (Note 11) as follows:
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Amortized cost
31

 
32

Gross unrealized gain
—

 
—

Gross unrealized loss
—

 
—

Fair value
31

 
32

6. Inventories
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Finished goods
673

 
591

Work-in-process
63

 
57

Raw materials and supplies
297

 
252

Total
1,033

 
900

7. Goodwill and Intangible Assets, Net
Goodwill
 
Engineered
Materials
 
Acetate Tow
 
Industrial
Specialties
 
Acetyl
Intermediates
 
Total
 
(In $ millions)
As of December 31, 2017
643

 
149

 
40

 
171

 
1,003

Acquisitions (Note 3)
84

 
—

 
—

 
—

 
84

Exchange rate changes
(16
)
 
—

 
(1
)
 
(6
)
 
(23
)
As of September 30, 2018(1)
711

 
149

 
39

 
165

 
1,064

______________________________
(1) 
There were $0 million of accumulated impairment losses as of September 30, 2018.
The Company assesses the recoverability of the carrying amount of its reporting unit goodwill either qualitatively or quantitatively annually during the third quarter of its fiscal year using June 30 balances or whenever events or changes in circumstances indicate that the carrying amount of the asset may not be fully recoverable. In connection with the Company's annual goodwill impairment assessment, the Company did not record an impairment loss to goodwill during the nine months ended September 30, 2018 as the estimated fair value for each of the Company's reporting units exceeded the carrying amount of the underlying assets by a substantial margin.

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Table of Contents

Intangible Assets, Net
Finite-lived intangible assets are as follows:
 
Licenses
 
Customer-
Related
Intangible
Assets
 
Developed
Technology
 
Covenants
Not to
Compete
and Other
 
Total
 
 
(In $ millions)
 
Gross Asset Value
 
 
 
 
 
 
 
 
 
 
As of December 31, 2017
38

 
640

 
45

 
54

 
777

 
Acquisitions (Note 3)
—

 
32

 
—

 
3

 
35

(1) 
Renewals
6

(2) 
—

 
—

 
—

 
6

 
Exchange rate changes
(2
)
 
(17
)
 
(1
)
 
—

 
(20
)
 
As of September 30, 2018
42

 
655

 
44

 
57

 
798

 
Accumulated Amortization
 
 
 
 
 
 
 
 
 
 
As of December 31, 2017
(33
)
 
(496
)
 
(30
)
 
(32
)
 
(591
)
 
Amortization
(2
)
 
(12
)
 
(3
)
 
(1
)
 
(18
)
 
Exchange rate changes
2

 
13

 
1

 
—

 
16

 
As of September 30, 2018
(33
)
 
(495
)
 
(32
)
 
(33
)
 
(593
)
 
Net book value
9

 
160

 
12

 
24

 
205

 
______________________________
(1) 
Represents intangible assets acquired related to Omni Plastics (Note 3) with a weighted average amortization period of 11 years.
(2) 
During the nine months ended September 30, 2018, the Company extended a research and development technology agreement license, which will be amortized over a period of 5 years.
Indefinite-lived intangible assets are as follows:
 
Trademarks
and Trade Names
 
(In $ millions)
As of December 31, 2017
115

Acquisitions (Note 3)
—

Accumulated impairment losses
—

Exchange rate changes
(3
)
As of September 30, 2018
112

The Company assesses the recoverability of the carrying amount of its indefinite-lived intangible assets either qualitatively or by utilizing the relief from royalty method under the income approach annually during the third quarter of its fiscal year using June 30 balances or whenever events or change in circumstances indicate that the carrying amount of the assets may not be fully recoverable. In connection with the Company's annual indefinite-lived intangible assets impairment assessment, the Company did not record an impairment loss to indefinite-lived intangible assets during the nine months ended September 30, 2018 as the estimated fair value of each of the Company's indefinite-lived intangible assets exceeded the carrying amount of the underlying assets by a substantial margin.

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Table of Contents

Estimated amortization expense for the succeeding five fiscal years is as follows:
 
(In $ millions)
2019
22

2020
20

2021
19

2022
17

2023
14

8. Current Other Liabilities
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Asset retirement obligations
4

 
19

Benefit obligations (Note 11)
30

 
30

Customer rebates (Note 20)
65

 
65

Derivatives (Note 16)
3

 
3

Environmental (Note 12)
25

 
14

Insurance
4

 
5

Interest
21

 
17

Restructuring (Note 14)
8

 
5

Salaries and benefits
109

 
113

Sales and use tax/foreign withholding tax payable
31

 
16

Other
47

 
67

Total
347

 
354

9. Noncurrent Other Liabilities
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Asset retirement obligations
15

 
7

Deferred proceeds
45

 
47

Deferred revenue (Note 20)
7

 
6

Environmental (Note 12)
51

 
59

Income taxes payable
—

 
197

Insurance
40

 
43

Other
48

 
54

Total
206

 
413


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Table of Contents

10. Debt
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Short-Term Borrowings and Current Installments of Long-Term Debt - Third Party and Affiliates
 
 
 
Current installments of long-term debt
74

 
63

Short-term borrowings, including amounts due to affiliates(1)
78

 
86

Revolving credit facility(2)
—

 
97

Accounts receivable securitization facility(3)
77

 
80

Total
229

 
326

______________________________
(1) 
The weighted average interest rate was 3.3% and 3.4% as of September 30, 2018 and December 31, 2017, respectively.
(2) 
The weighted average interest rate was 4.1% as of December 31, 2017.
(3) 
The weighted average interest rate was 2.9% and 2.1% as of September 30, 2018 and December 31, 2017, respectively.
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Long-Term Debt
 
 
 
Senior unsecured term loan due 2021(1)
475

 
494

Senior unsecured notes due 2019, interest rate of 3.250%
347

 
360

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

 
400

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

 
500

Senior unsecured notes due 2023, interest rate of 1.125%
866

 
897

Senior unsecured notes due 2025, interest rate of 1.250%
346

 
359

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

 
169

Nilit bank loans due at various dates through 2026(2)
10

 
11

Obligations under capital leases due at various dates through 2054
173

 
208

Subtotal
3,286

 
3,398

Unamortized debt issuance costs(3)
(16
)
 
(20
)
Current installments of long-term debt
(74
)
 
(63
)
Total
3,196

 
3,315

______________________________
(1) 
The margin for borrowings under the senior unsecured term loan due 2021 was 1.5% above LIBOR at current Company credit ratings.
(2) 
The weighted average interest rate was 1.3% and 1.3% as of September 30, 2018 and December 31, 2017, respectively.
(3) 
Related to the Company's long-term debt, excluding obligations under capital leases.
Senior Credit Facilities
In July 2016, Celanese, Celanese US and certain subsidiaries entered into a new senior credit agreement ("Credit Agreement") consisting of a $500 million senior unsecured term loan and a $1.0 billion senior unsecured revolving credit facility (with a letter of credit sublimit), each maturing in 2021. The Credit Agreement is guaranteed by Celanese, Celanese US and substantially all of its domestic subsidiaries (the "Subsidiary Guarantors").

18

Table of Contents

The Company's debt balances and amounts available for borrowing under its senior unsecured revolving credit facility are as follows:
 
As of
September 30,
2018
 
(In $ millions)
Revolving Credit Facility
 
Borrowings outstanding(1)
—

Letters of credit issued
—

Available for borrowing(2)
1,000

______________________________
(1) 
The Company borrowed $640 million and repaid $737 million under its senior unsecured revolving credit facility during the nine months ended September 30, 2018.
(2) 
The margin for borrowings under the senior unsecured revolving credit facility was 1.5% above LIBOR at current Company credit ratings.
Senior Notes
The Company has outstanding senior unsecured notes, issued in public offerings registered under the Securities Act of 1933 ("Securities Act"), as amended (collectively, the "Senior Notes"). The Senior Notes were issued by Celanese US and are guaranteed on a senior unsecured basis by Celanese and the Subsidiary Guarantors.
Accounts Receivable Securitization Facility
The Company has a US accounts receivable securitization facility involving receivables of certain of its domestic subsidiaries of the Company transferred to a wholly-owned, "bankruptcy remote" special purpose subsidiary of the Company ("SPE"). The securitization facility, which permits cash borrowings and letters of credit, expires in July 2019. All of the SPE's assets have been pledged to the administrative agent in support of the SPE's obligations under the facility.
The Company's debt balances and amounts available for borrowing under its securitization facility are as follows:
 
As of
September 30,
2018
 
(In $ millions)
Accounts Receivable Securitization Facility
 
Borrowings outstanding(1)
77

Letters of credit issued
29

Available for borrowing
5

Total borrowing base
111

 
 
Maximum borrowing base(2)
120

______________________________
(1) 
The Company borrowed $25 million and repaid $28 million during the nine months ended September 30, 2018.
(2) 
Outstanding accounts receivable transferred to the SPE was $185 million.
Other Financing Arrangements
On June 25, 2018, the Company entered into a factoring agreement with a global financial institution to sell certain accounts receivable on a non-recourse basis. These transactions are treated as a sale and are accounted for as a reduction in accounts receivable because the agreement transfers effective control over and risk related to the receivables to the buyer. The Company has no continuing involvement in the transferred receivables, other than collection and administrative responsibilities and, once sold, the accounts receivable are no longer available to satisfy creditors in the event of bankruptcy. The Company de-recognized $40 million and $38 million of accounts receivable during the three months ended June 30, 2018 and September 30, 2018, respectively.

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Table of Contents

Covenants
The Company's material financing arrangements contain customary covenants, including the maintenance of certain financial ratios, events of default and change of control provisions. Failure to comply with these covenants, or the occurrence of any other event of default, could result in acceleration of the borrowings and other financial obligations. The Company is in compliance with all covenants related to its debt agreements as of September 30, 2018.
11. Benefit Obligations
The components of net periodic benefit cost are as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
Pension
Benefits
 
Post-retirement
Benefits
 
Pension
Benefits
 
Post-retirement
Benefits
 
Pension
Benefits
 
Post-retirement
Benefits
 
Pension
Benefits
 
Post-retirement
Benefits
 
(In $ millions)
Service cost
2

 
—

 
2

 
1

 
7

 
—

 
6

 
1

Interest cost
26

 
1

 
27

 
—

 
78

 
2

 
80

 
1

Expected return on plan assets
(52
)
 
—

 
(50
)
 
—

 
(157
)
 
—

 
(148
)
 
—

Amortization of prior service cost (credit), net
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(1
)
Special termination benefit
—

 
—

 
—

 
—

 
1

 
—

 
1

 
—

Total
(24
)
 
1

 
(21
)
 
1

 
(71
)
 
2

 
(61
)
 
1

Benefit obligation funding is as follows:
 
As of
September 30,
2018
 
Total
Expected
2018
 
(In $ millions)
Cash contributions to defined benefit pension plans
17

 
23

Benefit payments to nonqualified pension plans
17

 
21

Benefit payments to other postretirement benefit plans
1

 
5

Cash contributions to German multiemployer defined benefit pension plans(1)
6

 
8

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

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Table of Contents

The components of environmental remediation reserves are as follows:
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Demerger obligations (Note 18)
31

 
28

Divestiture obligations (Note 18)
17

 
17

Active sites
15

 
15

US Superfund sites
11

 
11

Other environmental remediation reserves
2

 
2

Total
76

 
73

Remediation
Due to its industrial history and through retained contractual and legal obligations, the Company has the obligation to remediate specific areas on its own sites as well as on divested, demerger, orphan or US Superfund sites (as defined below). In addition, as part of the demerger agreement between the Company and Hoechst AG ("Hoechst"), a specified portion of the responsibility for environmental liabilities from a number of Hoechst divestitures was transferred to the Company (Note 18). Certain of these sites, at which the Company maintains continuing involvement, were and continue to be designated as discontinued operations when closed. The Company provides for such obligations when the event of loss is probable and reasonably estimable. The Company believes that environmental remediation costs will not have a material adverse effect on the financial position of the Company, but may have a material adverse effect on the results of operations or cash flows in any given period.
US Superfund Sites
In the US, the Company may be subject to substantial claims brought by US federal or state regulatory agencies or private individuals pursuant to statutory authority or common law. In particular, the Company has a potential liability under the US Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and related state laws (collectively referred to as "Superfund") for investigation and cleanup costs at certain sites. At most of these sites, numerous companies, including the Company, or one of its predecessor companies, have been notified that the US Environmental Protection Agency ("EPA"), state governing bodies or private individuals consider such companies to be potentially responsible parties ("PRP") under Superfund or related laws. The proceedings relating to these sites are in various stages. The cleanup process has not been completed at most sites, and the status of the insurance coverage for some of these proceedings is uncertain. Consequently, the Company cannot accurately determine its ultimate liability for investigation or cleanup costs at these sites.
As events progress at each site for which it has been named a PRP, the Company accrues, as appropriate, a liability for site cleanup. Such liabilities include all costs that are probable and can be reasonably estimated. In establishing these liabilities, the Company considers the contaminants of concern, the potential impact thereof, the relationship of the contaminants of concern to its current and historic operations, its shipment of waste to a site, its percentage of total waste shipped to the site, the types of wastes involved, the conclusions of any studies, the magnitude of any remedial actions that may be necessary and the number and viability of other PRPs. Often the Company joins with other PRPs to sign joint defense agreements that settle, among PRPs, each party's percentage allocation of costs at the site. Although the ultimate liability may differ from the estimate, the Company routinely reviews the liabilities and revises the estimate, as appropriate, based on the most current information available.
One such site is the Diamond Alkali Superfund Site, which is comprised of a number of sub-sites, including the Lower Passaic River Study Area ("LPRSA"), which is the lower 17-mile stretch of the Passaic River ("Lower Passaic River Site"), and the Newark Bay Area. The Company and 70 other companies are parties to a May 2007 Administrative Order on Consent with the EPA to perform a Remedial Investigation/Feasibility Study ("RI/FS") at the Lower Passaic River Site in order to identify the levels of contaminants and potential cleanup actions, including the potential migration of contaminants between the Lower Passaic River Site and the Newark Bay Area. Work on the RI/FS is ongoing, with a goal to complete it in 2018.

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Table of Contents

In March 2016, the EPA issued its final Record of Decision concerning the remediation of the lower 8.3 miles of the Lower Passaic River Site ("Lower 8.3 Miles"). Pursuant to the EPA's Record of Decision, the Lower 8.3 Miles must be dredged bank to bank and an engineered cap must be installed at an EPA estimated cost of approximately $1.4 billion. The Company owned and/or operated facilities in the vicinity of the Lower 8.3 Miles, but has found no evidence that it contributed any of the contaminants of concern to the Passaic River. On June 30, 2018, Occidental Chemical Corporation ("OCC"), the successor to the Diamond Alkali Company, sued a subsidiary of the Company and 119 other parties alleging claims for joint and several damages, contribution and declaratory relief under Section 107 and 113 of Superfund for costs to clean up the LPRSA portion of the Diamond Alkali Superfund Site, Occidental Chemical Corporation v. 21st Century Fox America, Inc., et al, No. 2:18-CV-11273-JLL-JAD (U.S. District Court New Jersey), alleging that each of the defendants owned or operated a facility that contributed contamination to the LPRSA. With respect to the Company, the OCC lawsuit is limited to the former Celanese facility that Essex County, New Jersey has agreed to indemnify the Company for and does not change the Company's estimated liability for LPRSA cleanup costs. The Company is vigorously defending these matters and currently believes that its ultimate allocable share of the cleanup costs with respect to the Lower Passaic River Site, estimated at less than 1%, will not be material to the Company's results of operations, cash flows or financial position.
13. Stockholders' Equity
Common Stock
On September 17, 2018, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment (the "Certificate of Amendment") to its Second Amended and Restated Certificate of Incorporation, as amended, to remove all references to the Company's Series B Common Stock, par value $0.0001 per share, therefrom and to redesignate the Company's Series A Common Stock, par value $0.0001 per share, as "Common Stock." Following the filing of the Certificate of Amendment, the Company no longer has series of its class of common stock.
The Company's Board of Directors follows a policy of declaring, subject to legally available funds, a quarterly cash dividend on each share of the Company's Common Stock unless the Company's Board of Directors, in its sole discretion, determines otherwise.
The Company's Board of Directors approved increases in the Company's Common Stock cash dividend rates as follows:
 
Increase
 
Quarterly Common
Stock Cash Dividend
 
Annual Common
Stock Cash Dividend
 
Effective Date
 
(In percentages)
 
(In $ per share)
 
 
April 2017
28
 
0.46
 
1.84
 
May 2017
April 2018
17
 
0.54
 
2.16
 
May 2018
The Company declared a quarterly cash dividend of $0.54 per share on its Common Stock on October 17, 2018, amounting to $72 million. The cash dividend will be paid on November 8, 2018 to holders of record as of October 29, 2018.
Treasury Stock
 
Nine Months Ended
September 30,
 
Total From
February 2008
Through
September 30, 2018
 
2018
 
2017
 
Shares repurchased
2,179,058

(1) 
5,436,803

 
41,958,077

Average purchase price per share
$
114.73

 
$
91.97

 
$
61.62

Shares repurchased (in $ millions)
$
250

 
$
500

 
$
2,585

Aggregate Board of Directors repurchase authorizations during the period (in $ millions)(2)
$
—

 
$
1,500

 
$
3,866

______________________________
(1) 
Excludes 1,700 common shares reacquired pursuant to an employee clawback agreement.
(2) 
These authorizations give management discretion in determining the timing and conditions under which shares may be repurchased. This repurchase program began in February 2008 and does not have an expiration date.

22

Table of Contents

The purchase of treasury stock reduces the number of shares outstanding. The repurchased shares may be used by the Company for compensation programs utilizing the Company's stock and other corporate purposes. The Company accounts for treasury stock using the cost method and includes treasury stock as a component of stockholders' equity.
Other Comprehensive Income (Loss), Net
 
Three Months Ended September 30,
 
2018
 
2017
 
Gross
Amount
 
Income
Tax
(Provision)
Benefit
 
Net
Amount
 
Gross
Amount
 
Income
Tax
(Provision)
Benefit
 
Net
Amount
 
(In $ millions)
Unrealized gain (loss) on marketable securities
—

 
—

 
—

 
—

 
—

 
—

Foreign currency translation gain (loss)
(31
)
 
(4
)
 
(35
)
 
44

 
(2
)
 
42

Gain (loss) on cash flow hedges
4

 
—

 
4

 
—

 
—

 
—

Pension and postretirement benefits gain (loss)
—

 
—

 
—

 
(1
)
 
—

 
(1
)
Total
(27
)
 
(4
)
 
(31
)
 
43

 
(2
)
 
41

 
Nine Months Ended September 30,
 
2018
 
2017
 
Gross
Amount
 
Income
Tax
(Provision)
Benefit
 
Net
Amount
 
Gross
Amount
 
Income
Tax
(Provision)
Benefit
 
Net
Amount
 
(In $ millions)
Unrealized gain (loss) on marketable securities
—

 
—

 
—

 
1

 
—

 
1

Foreign currency translation gain (loss)
(58
)
 
6

 
(52
)
 
143

 
5

 
148

Gain (loss) on cash flow hedges
8

 
1

 
9

 
(1
)
 
—

 
(1
)
Pension and postretirement benefits gain (loss)
1

 
—

 
1

 
4

 
—

 
4

Total
(49
)
 
7

 
(42
)
 
147

 
5

 
152

Adjustments to Accumulated other comprehensive income (loss), net, are as follows:
 
Foreign
Currency
Translation Gain (Loss)
 
Gain (Loss)
on Cash
Flow
Hedges
 
Pension
and
Postretirement
Benefits Gain (Loss)
 
Accumulated
Other
Comprehensive
Income
(Loss), Net
 
(In $ millions)
As of December 31, 2017
(176
)
 
2

 
(3
)
 
(177
)
Other comprehensive income (loss) before reclassifications
(58
)
 
9

 
1

 
(48
)
Amounts reclassified from accumulated other comprehensive income (loss)
—

 
(1
)

—


(1
)
Income tax (provision) benefit
6

 
1

 
—

 
7

As of September 30, 2018
(228
)
 
11

 
(2
)
 
(219
)

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Table of Contents

14. Other (Charges) Gains, Net
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
(In $ millions)
Restructuring
(1
)
 
—

 
(4
)
 
(3
)
InfraServ ownership change
—

 
—

 
—

 
(4
)
Plant/office closures
13

 
—

 
13

 
(50
)
Total
12

 
—

 
9

 
(57
)
During the three and nine months ended September 30, 2018, the Company recorded a $13 million gain within plant/office closures related to a non-income tax receivable refund from Nanjing, China, in its Acetyl Intermediates segment.
During the nine months ended September 30, 2018 and 2017, the Company recorded $4 million and $3 million, respectively, of employee termination benefits primarily related to the Company's ongoing efforts to align its businesses around its core value drivers.
During the nine months ended September 30, 2017, the Company provided notice of termination of a contract with a key raw materials supplier at its ethanol production unit in Nanjing, China. As a result, the Company recorded an estimated $50 million of plant/office closure costs primarily consisting of a $24 million contract termination charge and an $18 million reduction to its non-income tax receivable. The Nanjing, China ethanol production unit is included in the Company's Acetyl Intermediates segment.
The changes in the restructuring reserves by business segment are as follows:
 
Engineered
Materials
 
Acetate Tow
 
Industrial
Specialties
 
Acetyl
Intermediates
 
Other
 
Total
 
(In $ millions)
Employee Termination Benefits
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2017
1

 
—

 
—

 
1

 
1

 
3

Additions
—

 
2

 
3

 
—

 
—

 
5

Cash payments
(1
)
 
—

 
—

 
—

 
—

 
(1
)
Other changes
—

 
—

 
—

 
—

 
(1
)
 
(1
)
Exchange rate changes
—

 
—

 
—

 
—

 
—

 
—

As of September 30, 2018
—

 
2

 
3

 
1

 
—

 
6

Other Plant/Office Closures
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2017
—

 
—

 
—

 
2

 
—

 
2

Additions
—

 
—

 
—

 
—

 
—

 
—

Cash payments
—

 
—

 
—

 
—

 
—

 
—

Other changes
—

 
—

 
—

 
—

 
—

 
—

Exchange rate changes
—

 
—

 
—

 
—

 
—

 
—

As of September 30, 2018
—

 
—

 
—

 
2

 
—

 
2

Total
—

 
2

 
3

 
3

 
—

 
8


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Table of Contents

15. Income Taxes
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
 
(In percentages)
Effective income tax rate
12
 
20
 
16
 
19
The lower effective income tax rate for the three and nine months ended September 30, 2018 compared to the same period in 2017 is primarily due to the release of valuation allowances on net deferred tax assets in China and Singapore, reduction of the US statutory tax rate due to new tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the "TCJA") and reduced losses not providing tax benefits in certain jurisdictions, partially offset by increases in valuation allowances offsetting US foreign tax credits due to the provisions of the TCJA.
In December 2017, the TCJA was enacted and was effective January 1, 2018. ASC 740, Accounting for Income Taxes, requires companies to recognize the effects of tax law changes in the period of enactment. This overhaul of the US tax law made a number of substantial changes, including the reduction of the corporate tax rate from 35% to 21%, establishing a dividends received deduction for dividends paid by foreign subsidiaries to the US, elimination or limitation of certain deductions (interest, domestic production activities and executive compensation), imposing a mandatory tax on previously unrepatriated earnings accumulated offshore since 1986 and establishing global minimum income tax and base erosion tax provisions related to offshore activities and affiliated party payments.
Due to the timing of the new tax law and the substantial changes it brings, the SEC issued Staff Accounting Bulletin No. 118 ("SAB 118"), which provides registrants a measurement period to report the impact of the new US tax law. During the measurement period, provisional amounts for the effects of the law are recorded to the extent a reasonable estimate can be made. To the extent that all information necessary is not available, prepared or analyzed, companies may recognize provisional estimated amounts for a period of up to one year following enactment of the TCJA.
For year-end 2017, the Company recorded provisional amounts for impacts of the new tax law including: the deemed repatriation tax on post 1986 accumulated earnings and profits, the deferred tax rate change effect of the new law, gross foreign tax credit carryforwards and related valuation allowances to offset foreign tax credit carryforwards. Certain items or estimates that result in impacts of the TCJA being provisional include: detailed foreign earnings calculations for 2017 and 2018, projected foreign cash balances for certain foreign subsidiaries and finalized computations of foreign tax credit availability. Finally, the Company considers it likely that further technical guidance regarding certain components of the new provisions included in the TCJA, as well as clarity regarding state income tax conformity to current federal tax code, may be issued. During the three months ended September 30, 2018, the Company recorded a benefit for increases to provisional amounts for foreign tax credits net of associated valuation allowances of $9 million and a benefit for increases to provisional amounts for the deferred tax rate change effect of the TCJA of $7 million. The Company also recorded a decrease to the provisional amount for deemed repatriation tax under the TCJA of $4 million. However, this decrease did not have any impact on the unaudited interim consolidated statement of operations, as it will be offset by US foreign tax credit carryforwards. The changes in provisional amounts are primarily due to refined estimates of foreign source income and expense apportionment during the credit carryforward period, refined estimates of foreign tax credits generated during the carryforward period, revised calculations of the deemed repatriation tax due to the issuance of proposed guidance and revised estimates of 2017 temporary items as part of the annual tax return preparation process. The Company will continue to refine provisional amounts for the impacts of the TCJA as more refined information and further guidance become available.
The Company evaluates its deferred tax assets on a quarterly basis to determine whether a valuation allowance is necessary. Realization of deferred tax assets ultimately depends on the existence of sufficient taxable income in the applicable carryback or carryforward periods. Changes in the Company's estimates of future taxable income and prudent and feasible tax planning strategies will affect the estimate of the realization of the tax benefits of these foreign tax carryforwards. As such, the Company is currently evaluating tax planning strategies to enable use of the Company's foreign tax credit carryforwards that may decrease the Company's effective tax rate in future periods as the valuation allowance is reversed.
During the nine months ended September 30, 2018, the Company's uncertain tax positions decreased $2 million, primarily due to favorable technical clarifications in Germany and foreign currency exchange fluctuations, partially offset by an increase in US positions.

25

Table of Contents

In connection with the Company's US federal income tax audit for 2009 and 2010, the Company has received $192 million of proposed pre-tax adjustments related to various intercompany charges. In January 2018, the Company received proposed pre-tax adjustments for its 2011 and 2012 audit cycle in the amount of $198 million. In the event the Company is wholly unsuccessful in its defense and absent expected offsetting adjustments from foreign tax authorities, the proposed adjustments would result in the consumption of approximately $136 million of prior foreign tax credit carryforwards, which are substantially offset with a valuation allowance due to uncertain recoverability. The Company believes these proposed adjustments to be without merit and is vigorously defending its position.
The Company has initiated the appeal process for the 2009 and 2010 examination years. As negotiations progress, the Company will evaluate its position and will record any anticipated impacts accordingly. The Company does not currently anticipate a material impact from the appeals process related to the 2009 and 2010 examination years.
16. Derivative Financial Instruments
Derivatives Designated As Hedges
Net Investment Hedges
The Company uses derivative instruments, such as foreign currency forwards, and non-derivative financial instruments, such as foreign currency denominated debt, that may give rise to foreign currency transaction gains or losses to hedge the foreign currency exposure of net investments in foreign operations. Accordingly, the effective portion of gains and losses from remeasurement of derivative and non-derivative financial instruments is included in foreign currency translation within Accumulated other comprehensive income (loss), net in the unaudited consolidated balance sheets. Gains and losses are reclassified to earnings in the period the hedged investment is sold or liquidated.
The total notional amount of foreign currency denominated debt designated as a net investment hedge of net investments in foreign operations are as follows:
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In € millions)
Total
1,050

 
1,050


Cash Flow Hedges

In September 2018, the Company entered into a forward-starting interest rate swap to mitigate the risk of variability in the benchmark interest rate for an expected debt issuance in 2021. The swap was designated as a cash flow hedge and will be settled upon debt issuance.
The total notional amount of the forward-starting interest rate swap designated as a cash flow hedge is as follows:
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Total
400

 
—

Derivatives Not Designated As Hedges
Foreign Currency Forwards and Swaps
Gross notional values of the foreign currency forwards and swaps not designated as hedges are as follows:
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Total
693

 
740


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Table of Contents

Information regarding changes in the fair value of the Company's derivative and non-derivative instruments is as follows:
 
Gain (Loss) Recognized in Other Comprehensive Income (Loss)
 
Gain (Loss) Recognized in Earnings (Loss)
 
 
 
Three Months Ended September 30,
 
Statement of Operations Classification
 
2018
 
2017
 
2018
 
2017
 
 
(In $ millions)
 
 
Designated as Cash Flow Hedges
 
 
 
 
 
 
 
 
 
Commodity swaps
2

 
—

 
—

 
1

 
Cost of sales
Interest rate swaps
2

 
—

 
—

 
—

 
Interest expense
Foreign currency forwards
—

 
—

 
—

 
(1
)
 
Cost of sales
Total
4

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Designated as Net Investment Hedges
 
 
 
 
 
 
 
 
 
Foreign currency denominated debt (Note 10)
9

 
(30
)
 
—

 
—

 
N/A
Total
9

 
(30
)
 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Not Designated as Hedges
 
 
 
 
 
 
 
 
 
Foreign currency forwards and swaps
—

 
—

 
(2
)
 
—

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

 
—

 
(2
)
 
—

 
 
 
Gain (Loss) Recognized in Other Comprehensive Income (Loss)
 
Gain (Loss) Recognized in Earnings (Loss)
 
 
 
Nine Months Ended September 30,
 
Statement of Operations Classification
 
2018
 
2017
 
2018
 
2017
 
 
(In $ millions)
 
 
Designated as Cash Flow Hedges
 
 
 
 
 
 
 
 
 
Commodity swaps
6

 
1

 
1

 
3

 
Cost of sales
Interest rate swaps
2

 
—

 
—

 
—

 
Interest expense
Foreign currency forwards
1

 
(1
)
 
—

 
(1
)
 
Cost of sales
Total
9

 
—

 
1

 
2

 
 
 
 
 
 
 
 
 
 
 
 
Designated as Net Investment Hedges
 
 
 
 
 
 
 
 
 
Foreign currency denominated debt (Note 10)
44

 
(99
)
 
—

 
—

 
N/A
Total
44

 
(99
)
 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Not Designated as Hedges