0000950123-09-053754 10-Q 13 20090930 20091027 20091027 Celanese CORP 0001306830 2820 980420726 DE 1231 10-Q 34 001-32410 091140005 1601 W. LBJ FREEWAY DALLAS TX 75234 972-443-4000 1601 W. LBJ FREEWAY DALLAS TX 75234 Blackstone Crystal Holdings Capital Partners (Cayman) IV Ltd. 20041022 10-Q 1 d69595e10vq.htm FORM 10-Q Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2009 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Commission File Number) 001-32410 CELANESE CORPORATION (Exact Name of Registrant as Specified in its Charter) Delaware 98-0420726 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1601 West LBJ Freeway, 75234-6034 Dallas, TX (Zip Code) (Address of Principal Executive Offices) (Registrant’s telephone number, including area code) (972) 443-4000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer þ Accelerated filer o Non-accelerated filer o Smaller reporting company o (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ The number of outstanding shares of the registrant’s Series A common stock, $0.0001 par value, as of October 22, 2009 was 143,601,100. -------------------------------------------------------------------------------- CELANESE CORPORATION Form 10-Q For the Quarterly Period Ended September 30, 2009 TABLE OF CONTENTS Page PART I FINANCIAL INFORMATION Item 1. Financial Statements a) Unaudited Interim Consolidated Statements of Operations for the three and nine months ended September 30, 2009 and 2008 3 b) Unaudited Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008 4 c) Unaudited Interim Consolidated Statements of Shareholders’ Equity and Comprehensive Income (Loss) for the nine months ended September 30, 2009 5 d) Unaudited Interim Consolidated Statements of Cash Flows for the nine months ended September 30, 2009 and 2008 6 e) Notes to the Unaudited Interim Consolidated Financial Statements 7 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 34 Item 3. Quantitative and Qualitative Disclosures about Market Risk 47 Item 4. Controls and Procedures 47 PART II OTHER INFORMATION Item 1. Legal Proceedings 49 Item 1A. Risk Factors 49 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 49 Item 3. Defaults Upon Senior Securities 49 Item 4. Submission of Matters to a Vote of Security Holders 49 Item 5. Other Information 49 Item 6. Exhibits 50 Signatures 51 EX-10.1 EX-31.1 EX-31.2 EX-32.1 EX-31.1 EX-101 INSTANCE DOCUMENT EX-101 SCHEMA DOCUMENT EX-101 CALCULATION LINKBASE DOCUMENT EX-101 LABELS LINKBASE DOCUMENT EX-101 PRESENTATION LINKBASE DOCUMENT EX-101 DEFINITION LINKBASE DOCUMENT 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, 2009 2008 2009 2008 (In $ millions, except for per share data) Net sales 1,304 1,823 3,694 5,537 Cost of sales (1,038 ) (1,490 ) (2,980 ) (4,390 ) Gross profit 266 333 714 1,147 Selling, general and administrative expenses (110 ) (142 ) (338 ) (416 ) Amortization of intangible assets (primarily customer-related intangible assets) (20 ) (19 ) (58 ) (58 ) Research and development expenses (18 ) (18 ) (56 ) (59 ) Other (charges) gains, net (96 ) (1 ) (123 ) (24 ) Foreign exchange gain (loss), net (2 ) (1 ) 1 3 Gain (loss) on disposition of businesses and assets, net 45 (1 ) 41 (1 ) Operating profit 65 151 181 592 Equity in net earnings (loss) of affiliates 19 19 44 46 Interest expense (51 ) (65 ) (156 ) (195 ) Interest income 2 8 7 27 Dividend income — cost investments 19 35 81 138 Other income (expense), net (5 ) 4 (2 ) 9 Earnings (loss) from continuing operations before tax 49 152 155 617 Income tax (provision) benefit 350 12 328 (106 ) Earnings (loss) from continuing operations 399 164 483 511 Earnings (loss) from operation of discontinued operations - (8 ) - (120 ) Income tax (provision) benefit from discontinued operations - 2 - 45 Earnings (loss) from discontinued operations - (6 ) - (75 ) Net earnings (loss) 399 158 483 436 Less: Net earnings (loss) attributable to noncontrolling interests - - - (1 ) Net earnings (loss) attributable to Celanese Corporation 399 158 483 437 Cumulative preferred stock dividends (3 ) (3 ) (8 ) (8 ) Net earnings (loss) available to common shareholders 396 155 475 429 Amounts attributable to Celanese Corporation Earnings (loss) from continuing operations 399 164 483 512 Earnings (loss) from discontinued operations - (6 ) - (75 ) Net earnings (loss) 399 158 483 437 Earnings (loss) per common share — basic Continuing operations 2.76 1.09 3.31 3.36 Discontinued operations - (0.04 ) - (0.50 ) Net earnings (loss) — basic 2.76 1.05 3.31 2.86 Earnings (loss) per common share — diluted Continuing operations 2.53 1.01 3.08 3.08 Discontinued operations - (0.04 ) - (0.45 ) Net earnings (loss) — diluted 2.53 0.97 3.08 2.63 Weighted average shares — basic 143,591,231 147,063,241 143,542,405 149,976,915 Weighted average shares — diluted 157,562,916 162,911,689 156,678,265 166,008,010 3 -------------------------------------------------------------------------------- Table of Contents CELANESE CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS As of As of September 30, December 31, 2009 2008 (In $ millions, except share amounts) ASSETS Current assets Cash and cash equivalents 1,293 676 Trade receivables — third party and affiliates (net of allowance for doubtful accounts — 2009: $21; 2008: $25) 728 631 Non-trade receivables 223 274 Inventories 467 577 Deferred income taxes 60 24 Marketable securities, at fair value 4 6 Assets held for sale 2 2 Other assets 85 96 Total current assets 2,862 2,286 Investments in affiliates 811 789 Property, plant and equipment (net of accumulated depreciation — 2009: $1,084; 2008: $1,051) 2,687 2,470 Deferred income taxes 358 27 Marketable securities, at fair value 83 94 Other assets 328 357 Goodwill 806 779 Intangible assets, net 315 364 Total assets 8,250 7,166 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Short-term borrowings and current installments of long-term debt — third party and affiliates 265 233 Trade payables — third party and affiliates 558 523 Other liabilities 606 574 Deferred income taxes 16 15 Income taxes payable 28 24 Total current liabilities 1,473 1,369 Long-term debt 3,312 3,300 Deferred income taxes 127 122 Uncertain tax positions 225 218 Benefit obligations 1,157 1,167 Other liabilities 1,270 806 Commitments and contingencies Shareholders’ equity Preferred stock, $0.01 par value, 100,000,000 shares authorized (2009 and 2008: 9,600,000 issued and outstanding) - - Series A common stock, $0.0001 par value, 400,000,000 shares authorized (2009: 164,202,786 issued and 143,601,100 outstanding; 2008: 164,107,394 issued and 143,505,708 outstanding) - - Series B common stock, $0.0001 par value, 100,000,000 shares authorized (2009 and 2008: 0 shares issued and outstanding) - - Treasury stock, at cost (2009 and 2008: 20,601,686 shares) (781 ) (781 ) Additional paid-in capital 503 495 Retained earnings 1,505 1,047 Accumulated other comprehensive income (loss), net (543 ) (579 ) Total Celanese Corporation shareholders’ equity 684 182 Noncontrolling interests 2 2 Total shareholders’ equity 686 184 Total liabilities and shareholders’ equity 8,250 7,166 See the accompanying notes to the unaudited interim consolidated financial statements. 4 -------------------------------------------------------------------------------- Table of Contents CELANESE CORPORATION AND SUBSIDIARIES UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS) Nine Months Ended September 30, 2009 Shares Outstanding Amount (In $ millions, except share data) Preferred stock Balance as of the beginning of the period 9,600,000 - Issuance of preferred stock - - Balance as of the end of the period 9,600,000 - Series A common stock Balance as of the beginning of the period 143,505,708 - Stock option exercises 72,601 - Purchases of treasury stock, including related fees - - Stock awards 22,791 - Balance as of the end of the period 143,601,100 - Treasury stock Balance as of the beginning of the period 20,601,686 (781 ) Purchases of treasury stock, including related fees - - Balance as of the end of the period 20,601,686 (781 ) Additional paid-in capital Balance as of the beginning of the period 495 Stock-based compensation, net of tax 7 Stock option exercises 1 Balance as of the end of the period 503 Retained earnings Balance as of the beginning of the period 1,047 Net earnings (loss) attributable to Celanese Corporation 483 Series A common stock dividends (17 ) Preferred stock dividends (8 ) Balance as of the end of the period 1,505 Accumulated other comprehensive income (loss), net Balance as of the beginning of the period (579 ) Unrealized gain (loss) on securities (1 ) Foreign currency translation 31 Unrealized gain (loss) on interest rate swaps 7 Pension and postretirement benefits (1 ) Balance as of the end of the period (543 ) Total Celanese Corporation shareholders’ equity 684 Noncontrolling interests Balance as of the beginning of the period 2 Net earnings (loss) attributable to noncontrolling interests - Balance as of the end of the period 2 Total shareholders’ equity 686 Comprehensive income (loss) Net earnings (loss) 483 Other comprehensive income (loss), net of tax Unrealized gain (loss) on securities (1 ) Foreign currency translation 31 Unrealized gain (loss) on interest rate swaps 7 Pension and postretirement benefits (1 ) Total comprehensive income (loss), net of tax 519 Comprehensive income (loss) attributable to noncontrolling interests - Comprehensive income (loss) attributable to Celanese Corporation 519 See the accompanying notes to the unaudited interim consolidated financial statements. 5 -------------------------------------------------------------------------------- Table of Contents CELANESE CORPORATION AND SUBSIDIARIES UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended September 30, 2009 2008 (In $ millions) Operating activities Net earnings (loss) 483 436 Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Other charges (gains), net of amounts used 77 19 Depreciation, amortization and accretion 242 272 Deferred income taxes, net (367 ) (5 ) (Gain) loss on disposition of businesses and assets, net (41 ) (2 ) Other, net 8 30 Operating cash provided by (used in) discontinued operations (1 ) 10 Changes in operating assets and liabilities: Trade receivables — third party and affiliates, net (79 ) (14 ) Inventories 86 (120 ) Other assets 40 58 Trade payables — third party and affiliates 24 (43 ) Other liabilities (64 ) (296 ) Net cash provided by operating activities 408 345 Investing activities Capital expenditures on property, plant and equipment (130 ) (212 ) Acquisitions and related fees, net of cash acquired (1 ) (1 ) Proceeds from sale of businesses and assets, net 168 7 Deferred proceeds on Ticona Kelsterbach plant relocation 412 311 Capital expenditures related to Ticona Kelsterbach plant relocation (248 ) (122 ) Proceeds from sale of marketable securities 15 147 Purchases of marketable securities - (128 ) Settlement of cross currency swap agreement - (93 ) Other, net (25 ) (78 ) Net cash provided by (used in) investing activities 191 (169 ) Financing activities Short-term borrowings (repayments), net 31 8 Proceeds from long-term debt - 13 Repayments of long-term debt (56 ) (31 ) Refinancing costs (3 ) - Purchases of treasury stock, including related fees - (378 ) Stock option exercises 1 18 Series A common stock dividends (17 ) (18 ) Preferred stock dividends (8 ) (8 ) Other, net - (6 ) Net cash used in financing activities (52 ) (402 ) Exchange rate effects on cash and cash equivalents 70 (15 ) Net increase (decrease) in cash and cash equivalents 617 (241 ) Cash and cash equivalents at beginning of period 676 825 Cash and cash equivalents at end of period 1,293 584 See the accompanying notes to the unaudited interim consolidated financial statements. 6 -------------------------------------------------------------------------------- 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 leading global integrated chemical and advanced materials company. The Company’s business involves processing chemical raw materials, such as methanol, carbon monoxide and ethylene, and natural products, including wood pulp, into value-added chemicals, thermoplastic polymers and other chemical-based products. Basis of Presentation The unaudited interim consolidated financial statements for the three and nine months ended September 30, 2009 and 2008 contained in this Quarterly Report were prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for all periods presented. The unaudited interim consolidated financial statements and other financial information included in this Quarterly Report, unless otherwise specified, have been presented to separately show the effects of discontinued operations. In the opinion of management, the accompanying unaudited consolidated balance sheets and related unaudited interim consolidated statements of operations, cash flows and shareholders’ equity and comprehensive income (loss) include all adjustments, consisting only of normal recurring items necessary for their fair presentation in conformity with US GAAP. Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted in accordance with rules and regulations of the Securities and Exchange Commission (“SEC”). These unaudited interim consolidated financial statements should be read in conjunction with the Celanese Corporation and Subsidiaries consolidated financial statements as of and for the year ended December 31, 2008, as filed on February 13, 2009 with the SEC as part of the Company’s Annual Report on Form 10-K (the “2008 Form 10-K”). Operating results for the three and nine months ended September 30, 2009 and 2008 are not necessarily indicative of the results to be expected for the entire year. Estimates and Assumptions The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues, expenses and allocated charges during the reporting period. Significant estimates pertain to impairments of goodwill, intangible assets and other long-lived assets, purchase price allocations, restructuring costs and other (charges) gains, net, income taxes, pension and other postretirement benefits, asset retirement obligations, environmental liabilities and loss contingencies, among others. Actual results could differ from those estimates. Reclassifications The Company has reclassified certain prior period amounts to conform to the current period’s presentation. 2. Recent Accounting Pronouncements In August 2009, the Financial Accounting Standards Board (“FASB”) issued FASB Accounting Standards Update No. 2009-05, Fair Value Measurements and Disclosures (“ASU 2009-05”), which is effective for financial statements issued for interim and annual periods ending after August 2009. ASU 2009-05 amends FASB Accounting Standards Codification (“FASB ASC”) Topic 820-10 (“FASB ASC 820-10”). The update provides clarification on the techniques for measurement of fair value required of a reporting entity when a quoted price in an active market for an identical liability is not available. This update had no impact on the Company’s financial position, results of operations or cash flows. 7 -------------------------------------------------------------------------------- Table of Contents In June 2009, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards Codificationtm and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FAS No. 162 (“SFAS No. 168”), which is effective for financial statements issued for interim and annual periods ending after September 15, 2009. SFAS No. 168 created FASB ASC Topic 105-10 (“FASB ASC 105-10”). FASB ASC 105-10 identifies the sources of accounting principles and the framework for selecting principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with US GAAP (the GAAP hierarchy). This standard had no impact on the Company’s financial position, results of operations or cash flows. In May 2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS No. 165”), codified in FASB ASC Topic 855-10, which establishes accounting and disclosure standards for events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It defines financial statements as available to be issued, requiring the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, whether it be the date the financial statements were issued or the date they were available to be issued. The Company adopted SFAS No. 165 upon issuance. This standard had no impact on the Company’s financial position, results of operations or cash flows. In April 2009, the FASB issued FASB Staff Position (“FSP”) No. SFAS 115-2 and SFAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (“FSP No. SFAS 115-2 and SFAS 124-2”), which is codified in FASB ASC Topic 320-10. FSP No. SFAS 115-2 and SFAS 124-2 provides guidance to determine whether the holder of an investment in a debt security for which changes in fair value are not regularly recognized in earnings should recognize a loss in earnings when the investment is impaired. This FSP also improves the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the consolidated financial statements. The Company adopted FSP No. SFAS 115-2 and SFAS 124-2 beginning April 1, 2009. This FSP had no material impact on the Company’s financial position, results of operations or cash flows. In April 2009, the FASB issued FSP No. SFAS 107-1 and Accounting Principles Board (“APB”) Opinion No. APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (“FSP No. SFAS 107-1 and APB 28-1”). FSP No. SFAS 107-1 and APB 28-1, which is codified in FASB ASC Topic 825-10-50, require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. The Company adopted FSP No. SFAS 107-1 and APB 28-1 beginning April 1, 2009. This FSP had no impact on the Company’s financial position, results of operations or cash flows. In April 2009, the FASB issued FSP No. SFAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (“FSP No. SFAS 157-4”). FSP No. SFAS 157-4, which is codified in FASB ASC Topics 820-10-35-51 and 820-10-50-2, provides additional guidance for estimating fair value and emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. The Company adopted FSP No. SFAS 157-4 beginning April 1, 2009. This FSP had no material impact on the Company’s financial position, results of operations or cash flows. In April 2009, the FASB issued FSP No. SFAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies (“FSP No. SFAS 141(R)-1”). FSP No. SFAS 141(R)-1, which is codified in FASB ASC Topic 805, Business Combinations, addresses application issues related to the measurement, accounting and disclosure of assets and liabilities arising from contingencies in a business combination. The Company adopted FSP No. SFAS 141(R)-1 upon issuance. This FSP had no impact on the Company’s financial position, results of operations or cash flows. In December 2008, the FASB issued FSP No. SFAS 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets, (“FSP No. SFAS 132(R)-1”) which is codified in FASB ASC Topic 715-20-50. FSP No. SFAS 132(R)-1 requires enhanced disclosures about the plan assets of a Company’s defined benefit pension and other postretirement plans intended to provide financial statement users with a greater understanding of: 1) how investment allocation decisions are made; 2) the major categories of plan assets; 3) the inputs and valuation techniques used to measure the fair value of plan assets; 4) the effect of fair value measurements using significant unobservable inputs on changes in plan assets for the period; and 5) significant concentrations of risk within plan 8 -------------------------------------------------------------------------------- Table of Contents assets. The Company adopted FSP No. SFAS 132(R)-1 on January 1, 2009. This FSP had no impact on the Company’s financial position, results of operations or cash flows. 3. Asset Sales and Plant Closures In July 2009, the Company announced that its wholly-owned French subsidiary, Acetex Chimie, had completed the consultation procedure with the workers council on its “Project of Closure” and social plan related to the Company’s Pardies, France facility pursuant to which the Company announced its formal plan to cease all manufacturing operations and associated activities by December 2009. The Company has agreed with the workers council on a set of measures of assistance aimed at minimizing the effects of the plant’s closing on the Pardies workforce, including training, outplacement and severance. As a result of the Project of Closure, the Company recorded exit costs of $85 million during the three months ended September 30, 2009, which included $58 million in employee termination benefits, $20 million of contract termination costs and $7 million of long-lived impairment losses (see Note 15) to Other charges (gains), net, in the unaudited interim consolidated statements of operations. The fair value of the related held and used long-lived assets is $6 million as of September 30, 2009. In addition, the Company recorded $9 million of accelerated depreciation expense for the nine months ended September 30, 2009 and $3 million of environmental remediation reserves for the three months ended September 30, 2009 related to the shutdown of the Company’s Pardies, France facility. The Pardies, France facility is included in the Acetyl Intermediates segment. In July 2009, the Company completed the sale of its polyvinyl alcohol (“PVOH”) business to Sekisui Chemical Co., Ltd. (“Sekisui”) for a net cash purchase price of $168 million, resulting in a gain on disposition of $34 million. The net cash purchase price excludes the accounts receivable and payable retained by the Company. The transaction includes long-term supply agreements between Sekisui and the Company and therefore, does not qualify for treatment as a discontinued operation. The PVOH business is included in the Industrial Specialties segment. In July 2007, the Company reached an agreement with Babcock & Brown, a worldwide investment firm which specializes in real estate and utilities development, to sell the Company’s Pampa, Texas facility. The Company ceased its chemical operations at the site in December 2008. Proceeds received upon certain milestone events are treated as deferred proceeds and included in noncurrent Other liabilities in the Company’s unaudited consolidated balance sheets until the transaction is complete (expected to be in 2010), as defined in the sales agreement. The Pampa, Texas facility is included in the Acetyls Intermediates segment. In September 2008, the Company performed a discounted cash flow analysis which resulted in $21 million of long-lived asset impairment losses recorded to Other (charges) gains, net, in the unaudited interim consolidated statements of operations during the three months ended September 30, 2008 (see Note 15). As of September 30, 2009 and December 31, 2008, Assets held for sale in the unaudited consolidated balance sheets included an office building with a net book value of $2 million. 4. Inventories As of As of September 30, December 31, 2009 2008 (In $ millions) Finished goods 336 434 Work-in-process 23 24 Raw materials and supplies 108 119 Total 467 577 9 -------------------------------------------------------------------------------- Table of Contents 5. Marketable Securities, at Fair Value The Company’s captive insurance companies and pension-related trusts hold available-for-sale securities for capitalization and funding requirements, respectively. The Company received proceeds from sales of marketable securities and recorded realized gains (losses) to Other income (expense), net, in the unaudited interim consolidated statements of operations as follows: Three months ended Nine months ended September 30, September 30, 2009 2008 2009 2008 (In $ millions) Proceeds from sale of securities - 51 15 147 Realized gain on sale of securities 1 - 4 3 Realized loss on sale of securities - (2 ) - (5 ) Net realized gain (loss) on sale of securities 1 (2 ) 4 (2 ) The Company reviews all investments for other-than-temporary impairment at least quarterly or as indicators of impairment exist. Indicators of impairment include the duration and severity of the decline in fair value below carrying value as well as the intent and ability to hold the investment to allow for a recovery in the market value of the investment. In addition, the Company considers qualitative factors that include, but are not limited to: (i) the financial condition and business plans of the investee including its future earnings potential, (ii) the investee’s credit rating, and (iii) the current and expected market and industry conditions in which the investee operates. If a decline in the fair value of an investment is deemed by management to be other-than-temporary, the Company writes down the carrying value of the investment to fair value, and the amount of the write-down is included in net earnings. Such a determination is dependent on the facts and circumstances relating to each investment. As of September 30, 2009, the Company had gross unrealized losses of $6 million related to equity securities held for greater than twelve months in the unaudited consolidated balance sheets. The Company recognized $1 million of other-than-temporary impairment losses related to equity securities in the unaudited interim consolidated statements of operations for the three months ended September 30, 2009. The amortized cost, gross unrealized gain, gross unrealized loss and fair values for available-for-sale securities by major security type are as follows: Gross Gross Amortized Unrealized Unrealized Fair Cost Gain Loss Value (In $ millions) US government debt securities 28 5 - 33 US corporate debt securities 1 - - 1 Total debt securities 29 5 - 34 Equity securities 56 - (6 ) 50 Money market deposits and other securities 3 - - 3 As of September 30, 2009 88 5 (6 ) 87 US government debt securities 35 17 - 52 US corporate debt securities 3 - - 3 Total debt securities 38 17 - 55 Equity securities 55 - (13 ) 42 Money market deposits and other securities 3 - - 3 As of December 31, 2008 96 17 (13 ) 100 10 -------------------------------------------------------------------------------- Table of Contents Fixed maturities as of September 30, 2009 by contractual maturity are shown below. Actual maturities could differ from contractual maturities because borrowers may have the right to call or prepay obligations, with or without call or prepayment penalties. Cost Value (In $ millions) Within one year 4 4 From one to five years - - From six to ten years - - Greater than ten years 28 33 Total 32 37 Proceeds received from fixed maturities that mature within one year are expected to be reinvested into additional securities upon such maturity. 6. Goodwill and Intangible Assets, Net Goodwill Advanced Engineered Consumer Industrial Acetyl Materials Specialties Specialties Intermediates Total (In $ millions) As of December 31, 2008 258 252 34 235 779 Exchange rate changes 7 7 2 11 27 As of September 30, 2009 265 259 36 246 806 The Company assesses the recoverability of the carrying value of its reporting unit goodwill annually during the third quarter of its fiscal year using June 30 balances or whenever events or changes in circumstances indicate that the carrying amount of the asset may not be fully recoverable. Use of a discounted cash flow valuation model is common practice in impairment testing in the absence of available transactional market evidence to determine the fair value. The key assumptions used in the discounted cash flow valuation model include discount rates, growth rates, cash flow projections and terminal value rates. Discount rates, growth rates and cash flow projections are the most sensitive and susceptible to change as they require significant management judgment. Discount rates are determined by using a weighted average cost of capital (“WACC”). The WACC considers market and industry data as well as Company-specific risk factors for each reporting unit in determining the appropriate discount rates to be used. The discount rate utilized for each reporting unit is indicative of the return an investor would expect to receive for investing in such a business. Operational management, considering industry and Company-specific historical and projected data, develops growth rates and cash flow projections for each reporting unit. Terminal value rate determination follows common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and low long-term growth rates. The market approach uses the Company’s estimates for market growth, its market share, and projected sales or earnings based on historical data, various internal estimates, and certain external sources and are based on assumptions that are consistent with the plans and estimates the Company is using to manage the underlying business. Growth rates and sales or earnings projections are the most sensitive and susceptible to change as they require significant management judgment. The market approach uses comparable public companies and recent publicly disclosed transactions in order to calculate multiples to be applied to each reporting unit’s representative cash flow levels for the last twelve months to calculate an estimated fair value for each reporting unit. Comparable public companies were determined by selecting companies which offered operational and economic comparability in the areas of major importance to the investing public. If the calculated fair value using the combination of the two methods above is less than the current carrying value, impairment of the reporting unit may exist. In connection with the Company’s annual goodwill impairment test performed during the three months ended September 30, 2009, the Company did not record an impairment loss 11 -------------------------------------------------------------------------------- Table of Contents related to goodwill as the estimated fair value for each of the Company’s reporting units exceeded the carrying value of the underlying assets by a substantial margin. Valuation methodologies utilized to evaluate goodwill for impairment were consistent with prior periods. Specific assumptions, including discount rates, growth rates, cash flow projections and terminal value rates, were updated at the date of the test to consider current industry and Company-specific risk factors from the perspective of a market participant. The current business environment is subject to evolving market conditions and requires significant management judgment to interpret the potential impact to the Company’s assumptions. To the extent market changes result in adjusted assumptions, impairment losses may occur in future periods. Intangible Assets, Net Customer- Covenants Trademarks Related not to and Trade Intangible Developed Compete names Licenses Assets Technology and Other Total (In $ millions) Gross Asset Value As of December 31, 2008 82 29 537 12 12 672 Exchange rate changes 3 - 22 - - 25 As of September 30, 2009 85 29 559 12 12 697 Accumulated Amortization As of December 31, 2008 - (3 ) (285 ) (10 ) (10 ) (308 ) Amortization (5 ) (2 ) (49 ) (1 ) (1 ) (58 ) Exchange rate changes - - (15 ) - (1 ) (16 ) As of September 30, 2009 (5 ) (5 ) (349 ) (11 ) (12 ) (382 ) Net book value 80 24 210 1 - 315 Aggregate amortization expense for intangible assets with finite lives during the three months ended September 30, 2009 and 2008 was $18 million and $19 million, respectively. Aggregate amortization expense for intangible assets with finite lives was $53 million and $58 million for the nine months ended September 30, 2009 and 2008, respectively. In addition, during the three and nine months ended September 30, 2009 the Company recorded accelerated amortization expense of $2 million and $5 million, respectively, related to the AT Plastics trade name which was discontinued August 1, 2009. The trade name is now fully amortized. Estimated amortization expense for the succeeding five fiscal years is $64 million in 2010, $59 million in 2011, $45 million in 2012, $29 million in 2013 and $19 million in 2014. The Company assesses the recoverability of the carrying value of its indefinite-lived intangible assets annually during the third quarter of its fiscal year using June 30 balances or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. Management tests indefinite-lived intangible assets utilizing the relief from royalty method under the income approach to determine the estimated fair value for each indefinite-lived intangible asset. The relief from royalty method estimates the Company’s theoretical royalty savings from ownership of the intangible asset. Key assumptions used in this model include discount rates, royalty rates, growth rates, sales projections and terminal value rates. Discount rates, royalty rates, growth rates and sales projections are the assumptions most sensitive and susceptible to change as they require significant management judgment. Discount rates used are similar to the rates estimated by the WACC considering any differences in Company-specific risk factors. Royalty rates are established by management and are periodically substantiated by third-party valuation consultants. Operational management, considering industry and Company-specific historical and projected data, develops growth rates and sales projections associated with each indefinite-lived intangible asset. Terminal value rate determination follows common methodology of capturing the present value of perpetual sales estimates beyond the last projected period assuming a constant discount rate and low long-term growth rates. 12 -------------------------------------------------------------------------------- Table of Contents If the calculated fair value as described above is less than the current carrying value, impairment of the indefinite-lived intangible asset may exist. In connection with the Company’s annual indefinite-lived intangible assets impairment test performed during the three months ended September 30, 2009, the Company recorded an impairment loss of less than $1 million to certain indefinite-lived intangible assets. The fair value of such indefinite-lived intangible assets is $2 million as of September 30, 2009. Valuation methodologies utilized to evaluate indefinite-lived intangible assets for impairment were consistent with prior periods. Specific assumptions, including discount rates, royalty rates, sales projections and terminal value rates, were updated at the date of the test to consider current industry and Company-specific risk factors from the perspective of a market participant. The current business environment is subject to evolving market conditions and requires significant management judgment to interpret the potential impact to the Company’s assumptions. To the extent market changes result in adjusted assumptions, impairment losses may occur in future periods. For the three and nine months ended September 30, 2009, the Company did not renew or extend any intangible assets. 7. Debt As of As of September 30, December 31, 2009 2008 (In $ millions) Short-term borrowings and current installments of long-term debt — third party and affiliates Current installments of long-term debt 78 81 Short-term borrowings, principally comprised of amounts due to affiliates 187 152 Total 265 233 Long-term debt Senior credit facilities: Term loan facility due 2014 2,802 2,794 Term notes 7.125%, due 2009 - 14 Pollution control and industrial revenue bonds, interest rates ranging from 5.7% to 6.7%, due at various dates through 2030 181 181 Obligations under capital leases and other secured and unsecured borrowings due at various dates through 2054 240 211 Other bank obligations, interest rates ranging from 2.3% to 5.3%, due at various dates through 2014 167 181 Subtotal 3,390 3,381 Less: Current installments of long-term debt 78 81 Total 3,312 3,300 Senior Credit Facilities The Company’s senior credit agreement consists of $2,280 million of US dollar-denominated and €400 million of Euro-denominated term loans due 2014, a $600 million revolving credit facility terminating in 2013 and a $228 million credit-linked revolving facility terminating in 2014. Borrowings under the senior credit agreement bear interest at a variable interest rate based on LIBOR (for US dollars) or EURIBOR (for Euros), as applicable, or, for US dollar-denominated loans under certain circumstances, a base rate, in each case plus an applicable margin. The applicable margin for the term loans and any loans under the credit-linked revolving facility is 1.75%, subject to potential reductions as defined in the senior credit agreement. As of September 30, 2009 the applicable margin was 1.75%. The term loans under the senior credit agreement are subject to amortization at 1% of the initial principal amount per annum, payable quarterly. The remaining principal amount of the term loans is due on April 2, 2014. 13 -------------------------------------------------------------------------------- Table of Contents As of September 30, 2009, there were $92 million of letters of credit issued under the credit-linked revolving facility and $136 million remained available for borrowing. As of September 30, 2009, there were no outstanding borrowings or letters of credit issued under the revolving credit facility. On June 30, 2009, the Company entered into an amendment to the senior credit agreement. The amendment reduced the amount available under the revolving credit portion of the senior credit agreement from $650 million to $600 million and increased the first lien senior secured leverage ratio covenant that is applicable when any amount is outstanding under the revolving credit portion of the senior credit agreement as set forth below. Prior to giving effect to the amendment, the maximum first lien senior secured leverage ratio was 3.90 to 1.00. As amended, the maximum senior secured leverage ratio for the following trailing four-quarter periods is as follows: First Lien Senior Secured Leverage Ratio September 30, 2009 5.75 to 1.00 December 31, 2009 5.25 to 1.00 March 31, 2010 4.75 to 1.00 June 30, 2010 4.25 to 1.00 September 30, 2010 4.25 to 1.00 December 31, 2010 and thereafter 3.90 to 1.00 As a condition to borrowing funds or requesting that letters of credit be issued under that facility, the Company’s first lien senior secured leverage ratio (as calculated as of the last day of the most recent fiscal quarter for which financial statements have been delivered under the revolving facility) cannot exceed a certain threshold as specified above. Further, the Company’s first lien senior secured leverage ratio must be maintained at or below that threshold while any amounts are outstanding under the revolving credit facility. The first lien senior secured leverage ratio is calculated as the ratio of consolidated first lien senior secured debt to earnings before interest, taxes, depreciation and amortization, subject to adjustments identified in the credit agreement. Based on the estimated first lien senior secured leverage ratio for the trailing four quarters at September 30, 2009, the Company’s borrowing capacity under the revolving credit facility is $600 million. As of September 30, 2009, the Company estimates its first lien senior secured leverage ratio to be 4.37 to 1.00 (which would be 5.27 to 1.00 were the revolving credit facility fully drawn). The maximum first lien senior secured leverage ratio under the revolving credit facility for such period is 5.75 to 1.00. The Company’s senior credit agreement also contains a number of restrictions on certain of its subsidiaries, including, but not limited to, restrictions on their ability to incur indebtedness; grant liens on assets; merge, consolidate or sell assets; pay dividends or make other restricted payments; make investments; prepay or modify certain indebtedness; engage in transactions with affiliates; enter into sale-leaseback transactions or hedge transactions; or engage in other businesses. The senior credit agreement also contains a number of affirmative covenants and events of default, including a cross-default to other debt of certain of the Company’s subsidiaries in an aggregate amount equal to more than $40 million and the occurrence of a change of control. Failure to comply with these covenants, or the occurrence of any other event of default, could result in acceleration of the repayment of loans and other financial obligations under the Company’s senior credit agreement. The senior credit agreement is guaranteed by Celanese Holdings LLC, a subsidiary of Celanese Corporation, and certain domestic subsidiaries of the Company’s subsidiary, Celanese US Holdings LLC (“Celanese US”), a Delaware limited liability company, and is secured by a lien on substantially all assets of Celanese US and such guarantors, subject to certain agreed exceptions, pursuant to the Guarantee and Collateral Agreement, dated as of April 2, 2007, by and among Celanese Holdings LLC, Celanese US, certain subsidiaries of Celanese US and Deutsche Bank AG, New York Branch, as Administrative Agent and as Collateral Agent. The Company is in compliance with all of the covenants related to its debt agreements as of September 30, 2009. 14 -------------------------------------------------------------------------------- Table of Contents 8. Other Liabilities The components of current Other liabilities are as follows: As of As of September 30, December 31, 2009 2008 (In $ millions) Salaries and benefits 107 107 Environmental 17 19 Restructuring 102 32 Insurance 34 34 Asset retirement obligations 19 9 Derivatives 76 67 Current portion of benefit obligations 57 57 Interest 24 54 Sales and use tax/foreign withholding tax payable 10 16 Uncertain tax positions 6 - Other 154 179 Total 606 574 The components of noncurrent Other liabilities are as follows: As of As of September 30, December 31, 2009 2008 (In $ millions) Environmental 86 79 Insurance 78 85 Deferred revenue 50 56 Deferred proceeds (see Notes 3 and 19) 860 370 Asset retirement obligations 34 40 Derivatives 55 76 Other 107 100 Total 1,270 806 9. Benefit Obligations The components of net periodic benefit costs recognized are as follows: Postretirement Postretirement Pension Benefits Benefits Pension Benefits Benefits Three Months Ended September 30, Nine Months Ended September 30, 2009 2008 2009 2008 2009 2008 2009 2008 (In $ millions) Service cost 8 8 - - 22 24 1 1 Interest cost 50 50 5 4 145 149 13 13 Expected return on plan assets (54 ) (56 ) - - (156 ) (167 ) - - Recognized actuarial (gain) loss - 1 (1 ) (1 ) 1 1 (4 ) (3 ) Settlement (gain) loss - - - - 1 - - - Total 4 3 4 3 13 7 10 11 15 -------------------------------------------------------------------------------- Table of Contents The Company expects to contribute $40 million to its defined benefit pension plans in 2009. As of September 30, 2009, $29 million of contributions have been made. The Company’s estimates of its US defined benefit pension plan contributions reflect the provisions of the Pension Protection Act of 2006. The Company expects to make benefit contributions of $35 million under the provisions of its other postretirement benefit plans in 2009. For the nine months ended September 30, 2009, $20 million of benefit contributions have been made. The Company participates in multiemployer defined benefit plans in Europe covering certain employees. The Company’s contributions to the multiemployer defined benefit plans are based on specified percentages of employee contributions and totaled $4 million for the nine months ended September 30, 2009. 10. Environmental General The Company is subject to environmental laws and regulations worldwide which impose limitations on the discharge of pollutants into the air and water and establish standards for the treatment, storage and disposal of solid and hazardous wastes. The Company believes that it is in substantial compliance with all applicable environmental laws and regulations. The Company is also subject to retained environmental obligations specified in various contractual agreements arising from divestiture of certain businesses by the Company or one of its predecessor companies. The Company’s environmental reserves for remediation matters were $103 million and $98 million as of September 30, 2009 and December 31, 2008, respectively. Remediation Due to its industrial history and through retained contractual and legal obligations, the Company has the obligation to remediate specific areas on its own sites as well as on divested, orphan or US Superfund sites (as defined below). In addition, as part of the demerger agreement between the Company and Hoechst AG (“Hoechst”), a specified portion of the responsibility for environmental liabilities from a number of Hoechst divestitures was transferred to the Company. The Company provides for such obligations when the event of loss is probable and reasonably estimable. The Company believes that environmental remediation costs will not have a material adverse effect on the financial position of the Company, but may have a material adverse effect on the results of operations or cash flows in any given accounting period. US Superfund Sites In the US, the Company may be subject to substantial claims brought by US federal or state regulatory agencies or private individuals pursuant to statutory authority or common law. In particular, the Company has a potential liability under the US Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and related state laws (collectively referred to as “Superfund”) for investigation and cleanup costs at approximately 50 sites. At most of these sites, numerous companies, including certain companies comprising the Company, or one of its predecessor companies, have been notified that the Environmental Protection Agency, state governing bodies or private individuals consider such companies to be potentially responsible parties (“PRP”) under Superfund or related laws. The proceedings relating to these sites are in various stages. The cleanup process has not been completed at most sites and the status of the insurance coverage for most of these proceedings is uncertain. Consequently, the Company cannot determine accurately its ultimate liability for investigation or cleanup costs at these sites. As events progress at each site for which it has been named a PRP, the Company accrues, as appropriate, a liability for site cleanup. Such liabilities include all costs that are probable and can be reasonably estimated. In establishing these liabilities, the Company considers its shipment of waste to a site, its percentage of total waste shipped to the site, the types of wastes involved, the conclusions of any studies, the magnitude of any remedial actions that may be necessary and the number and viability of other PRPs. Often the Company joins with other PRPs to sign joint defense agreements that settle, among PRPs, each party’s percentage allocation of costs at the site. Although the ultimate liability may differ from the estimate, the Company routinely reviews the liabilities and 16 -------------------------------------------------------------------------------- Table of Contents revises the estimate, as appropriate, based on the most current information available. The Company had provisions totaling $10 million and $11 million as of September 30, 2009 and December 31, 2008, respectively. Additional information relating to environmental remediation activity is contained in the footnotes to the Company’s consolidated financial statements included in the 2008 Form 10-K. 11. Shareholders’ Equity Treasury Stock In February 2008, the Company’s Board of Directors authorized the repurchase of up to $400 million of the Company’s Series A common stock. This authorization was increased to $500 million in October 2008. The authorization gives management discretion in determining the conditions under which shares may be repurchased. As of September 30, 2009, the Company had repurchased 9,763,200 shares of its Series A common stock pursuant to this authorization. During the nine months ended September 30, 2009, the Company did not repurchase any shares of its Series A common stock. During the nine months ended September 30, 2008, the Company repurchased 9,763,200 shares of its Series A common stock at an average purchase price of $38.68 per share for a total of $378 million pursuant to this authorization. Purchases of treasury stock reduce the number of shares outstanding and the repurchased shares may be used by the Company for compensation programs utilizing the Company’s stock and other corporate purposes. The Company accounts for treasury stock using the cost method and includes treasury stock as a component of Shareholders’ equity. Other Comprehensive Income (Loss), Net Adjustments to net earnings (loss) to calculate Other comprehensive income (loss), net, totaled $36 million and $(89) million for the nine months ended September 30, 2009 and 2008, respectively. These amounts were net of tax expense of zero for both the nine months ended September 30, 2009 and 2008. Adjustments to net earnings (loss) for comprehensive income (loss) totaled $45 million and $(98) million for the three months ended September 30, 2009 and 2008, respectively. These amounts were net of tax expense of $1 million and $0 for the three months ended September 30, 2009 and 2008, respectively. 12. Commitments and Contingencies The Company is involved in a number of legal proceedings, lawsuits and claims incidental to the normal conduct of business, relating to such matters as product liability, antitrust, past waste disposal practices and release of chemicals into the environment. While it is impossible at this time to determine with certainty the ultimate outcome of these proceedings, lawsuits and claims, the Company is actively defending those matters where the Company is named as a defendant. Additionally, the Company believes it has determined its best estimate, based on the advice of legal counsel, that adequate reserves have been made and that the ultimate outcomes will not have a material adverse effect on the financial position of the Company; however, the ultimate outcome of any given matter may have a material impact on the results of operations or cash flows of the Company in any given reporting period. Plumbing Actions CNA Holdings, LLC (“CNA Holdings”), a US subsidiary of the Company, which included the US business now conducted by the Ticona business included in the Advanced Engineered Materials segment, along with Shell Oil Company (“Shell”), E.I. DuPont de Nemours and Company (“DuPont”) and others, has been a defendant in a series of lawsuits, including a number of class actions, alleging that plastics manufactured by these companies that were utilized in the production of plumbing systems for residential property were defective or caused such plumbing systems to fail. Based on, among other things, the findings of outside experts and the successful use of Ticona’s acetal copolymer in similar applications, CNA Holdings does not believe Ticona’s acetal copolymer was defective or caused the plumbing systems to fail. In many cases CNA Holdings’ potential future exposure may be limited by invocation of the statute of limitations since CNA Holdings ceased selling the resin for use in the plumbing systems in site-built homes during 1986 and in manufactured homes during 1990. 17 -------------------------------------------------------------------------------- Table of Contents In November 1995, CNA Holdings, DuPont and Shell entered into national class action settlements which called for the replacement of plumbing systems of claimants who have had qualifying leaks, as well as reimbursements for certain leak damage. In connection with such settlements, the three companies had agreed to fund these replacements and reimbursements up to an aggregate amount of $950 million. In 2002, based on projections that the cap would be exceeded, Shell and the Company added $75 million for a total of $1.025 billion. The cap was further increased by $78 million to $1.103 billion primarily as a result of funds transferred from the US Brass Trust. Additional funds transferred from the US Brass Trust may further increase the cap in the future. Excess funds remaining upon complete dissolution of the class action are payable to Shell and the Company. During the period between 1995 and 2001, CNA Holdings was also named as a defendant in the following putative class actions: • Cox, et al. v. Hoechst Celanese Corporation, et al., No. 94-0047 (Chancery Ct., Obion County, Tennessee) (class was certified). • Couture, et al. v. Shell Oil Company, et al., No. 200-06-000001-985 (Quebec Superior Court, Canada). • Dilday, et al. v. Hoechst Celanese Corporation, et al., No. 15187 (Chancery Ct., Weakley County, Tennessee). • Furlan v. Shell Oil Company, et al., No. C967239 (British Columbia Supreme Court, Vancouver Registry, Canada). • Gariepy, et al. v. Shell Oil Company, et al., No. 30781/99 (Ontario Court General Division, Canada). • Shelter General Insurance Co., et al. v. Shell Oil Company, et al., No. 16809 (Chancery Ct., Weakley County, Tennessee). • St. Croix Ltd., et al. v. Shell Oil Company, et al., No. 1997/467 (Territorial Ct., St. Croix Division, the US Virgin Islands). • Tranter v. Shell Oil Company, et al., No. 46565/97 (Ontario Court General Division, Canada). In addition, between 1994 and 2008 CNA Holdings was named as a defendant in numerous non-class actions filed in Florida, Georgia, Louisiana, Mississippi, New Jersey, Tennessee and Texas, the US Virgin Islands and Canada of which nine are currently pending. In all of these actions, the plaintiffs have sought recovery for alleged damages caused by leaking polybutylene plumbing. Damage amounts have generally not been specified but these cases generally do not involve (either individually or in the aggregate) a large number of homes. As of September 30, 2009 and December 31, 2008, the Company had remaining accruals of $62 million and $64 million, respectively, of which $1 million is included in current Other liabilities in the unaudited consolidated balance sheets. The Company reached settlements with CNA Holdings’ insurers specifying their responsibility for these claims. During the year ended December 31, 2007, the Company received $23 million of insurance proceeds from various CNA Holdings’ insurers as full satisfaction for their responsibility for these claims. During the year ended December 31, 2008, the Company received less than $1 million from insurers. During the nine months ended September 30, 2009, the Company recognized a $2 million decrease in legal reserves for plumbing claims for which the statute of limitations has expired and received $1 million of insurance recoveries associated with plumbing cases. Plumbing Insurance Indemnifications Celanese GmbH entered into agreements with insurance companies related to product liability settlements associated with Celcon® plumbing claims. These agreements, except those with insolvent insurance companies, require the Company to indemnify and/or defend these insurance companies in the event that third parties seek additional monies for matters released in these agreements. The indemnifications in these agreements do not provide for time limitations. In certain of the agreements, Celanese GmbH received a fixed settlement amount. The indemnities under these agreements generally are limited to, but in some cases are greater than, the amount received in settlement from the 18 -------------------------------------------------------------------------------- Table of Contents insurance company. The maximum exposure under these indemnifications is $95 million. Other settlement agreements have no stated limits. There are other agreements whereby the settling insurer agreed to pay a fixed percentage of claims that relate to that insurer’s policies. The Company has provided indemnifications to the insurers for amounts paid in excess of the settlement percentage. These indemnifications do not provide for monetary or time limitations. Sorbates Antitrust Actions In May 2002, the European Commission informed Hoechst of its intent to officially investigate the sorbates industry. In early January 2003, the European Commission served Hoechst, Nutrinova, Inc., a US subsidiary of Nutrinova Nutrition Specialties & Food Ingredients GmbH and previously a wholly owned subsidiary of Hoechst (“Nutrinova”), and a number of competitors of Nutrinova with a statement of objections alleging unlawful, anticompetitive behavior affecting the European sorbates market. In October 2003, the European Commission ruled that Hoechst, Chisso Corporation, Daicel Chemical Industries Ltd. (“Daicel”), The Nippon Synthetic Chemical Industry Co. Ltd. and Ueno Fine Chemicals Industry Ltd. operated a cartel in the European sorbates market between 1979 and 1996. The European Commission imposed a total fine of €138 million on such companies, of which €99 million was assessed against Hoechst and its legal successors. The case against Nutrinova was closed. Pursuant to the Demerger Agreement with Hoechst, Celanese GmbH was assigned the obligation related to the sorbates antitrust matter; however, Hoechst, and its legal successors, agreed to indemnify Celanese GmbH for 80% of any costs Celanese GmbH incurred relative to this matter. Accordingly, Celanese GmbH recognized a receivable from Hoechst from this indemnification. In June 2008, the Court of First Instance of the European Communities (Fifth Chamber) reduced the fine against Hoechst to €74.25 million and in July 2008, Hoechst paid the €74.25 million fine. In August 2008, the Company paid Hoechst €17 million, including interest of €2 million, in satisfaction of its 20% obligation with respect to the fine. Based on the advice of external counsel and a review of the existing facts and circumstances relating to the sorbates antitrust matters, including the settlement of the European Union’s investigation, as well as civil claims filed and settled, the Company released its accruals related to the settled sorbates antitrust matters and the indemnification receivables resulting in a gain of $8 million, net, for the year ended December 31, 2008. In addition, in 2004 a civil antitrust action styled Freeman Industries LLC v. Eastman Chemical Co., et. al. was filed against Hoechst and Nutrinova, in the Law Court for Sullivan County in Kingsport, Tennessee. The plaintiff sought monetary damages and other relief for alleged conduct involving the sorbates industry. The trial court dismissed the plaintiff’s claims and upon appeal the Supreme Court of Tennessee affirmed the dismissal of the plaintiff’s claims. In December 2005, the plaintiff lost an attempt to amend its complaint and the entire action was dismissed with prejudice by the trial court. Plaintiff’s counsel has subsequently filed a new complaint with new class representatives in the District Court of the District of Tennessee. The Company’s motion to strike the class allegations was granted in April 2008 and the plaintiff’s request to appeal the ruling is currently pending. Acetic Acid Patent Infringement Matters On May 9, 1999, Celanese International Corporation filed a private criminal action styled Celanese International Corporation v. China Petrochemical Development Corporation against China Petrochemical Development Corporation (“CPDC”) in the Taiwan Kaoshiung District Court alleging that CPDC infringed Celanese International Corporation’s patent covering the manufacture of acetic acid. Celanese International Corporation also filed a supplementary civil brief which, in view of changes in Taiwanese patent laws, was subsequently converted to a civil action alleging damages against CPDC based on a period of infringement of ten years, 1991-2000, and based on CPDC’s own data which was reported to the Taiwanese securities and exchange commission. Celanese International Corporation’s patent was held valid by the Taiwanese patent office. On August 31, 2005, the District Court held that CPDC infringed Celanese International Corporation’s acetic acid patent and awarded Celanese International Corporation approximately $28 million (plus interest) for the period of 1995 through 1999. In October 2008, the High Court, on appeal, reversed the District Court’s $28 million award to the Company. The Company appealed to the Superior Court in November 2008, and the court remanded the case to the IP court on June 4, 2009. On January 16, 2006, the District Court awarded Celanese International Corporation $800,000 (plus interest) for the 19 -------------------------------------------------------------------------------- Table of Contents year 1990. In January 2009, the High Court, on appeal, affirmed the District Court’s award and CPDC appealed on February 5, 2009. On June 29, 2007, the District Court awarded Celanese International Corporation $60 million (plus interest) for the period of 2000 through 2005. CPDC appealed this ruling and on July 21, 2009, the High Court ruled in CPDC’s favor. The Company appealed this decision to the High Court in August 2009. Domination Agreement On October 1, 2004, a Domination Agreement between Celanese GmbH and Celanese Europe Holding GmbH & Co. KG (“the Purchaser”) became operative. When the Domination Agreement became operative, the Purchaser became obligated to offer to acquire all outstanding Celanese GmbH shares from the minority shareholders of Celanese GmbH in return for payment of fair cash compensation. The amount of this fair cash compensation was determined to be €41.92 per share, plus interest, in accordance with applicable German law. Until the Squeeze-Out was registered in the commercial register in Germany on December 22, 2006, any minority shareholder who elected not to sell its shares to the Purchaser was entitled to remain a shareholder of Celanese GmbH and to receive from the Purchaser a gross guaranteed annual payment on its shares of €3.27 per Celanese GmbH share less certain corporate taxes in lieu of any dividend. The Domination Agreement could not be terminated by the Purchaser in the ordinary course of business until September 30, 2009. The Company’s subsidiaries, Celanese International Holdings Luxembourg S.à r.l. (“CIH”), formerly Celanese Caylux Holdings Luxembourg S.C.A., and Celanese US, have each agreed to provide the Purchaser with financing to strengthen the Purchaser’s ability to fulfill its obligations under, or in connection with, the Domination Agreement and to ensure that the Purchaser will perform all of its obligations under, or in connection with, the Domination Agreement when such obligations become due, including, without limitation, the obligation to compensate Celanese GmbH for any statutory annual loss incurred by Celanese GmbH during the term of the Domination Agreement. If CIH and/or Celanese US are obligated to make payments under such guarantees or other security to the Purchaser, the Company may not have sufficient funds for payments on its indebtedness when due. The Company has not had to compensate Celanese GmbH for an annual loss for any period during which the Domination Agreement has been in effect. The amounts of the fair cash compensation and of the guaranteed annual payment offered under the Domination Agreement are under court review in special award proceedings. As a result of these proceedings, either amount could be increased by the court so that all former Celanese GmbH shareholders, including those who have already tendered their shares into the mandatory offer and have received the fair cash compensation could claim the respective higher amounts. Certain former Celanese GmbH shareholders may initiate such proceedings also with respect to the Squeeze-Out compensation. In this case, former Celanese GmbH shareholders who ceased to be shareholders of Celanese GmbH due to the Squeeze-Out are entitled, pursuant to a settlement agreement between the Purchaser and certain former Celanese GmbH shareholders, to claim for their shares the higher of the compensation amounts determined by the court in these different proceedings. Payments these shareholders already received as compensation for their shares will be offset so that those shareholders who ceased to be shareholders of Celanese GmbH due to the Squeeze-Out are not entitled to more than the higher of the amount set in the two court proceedings. Shareholder Litigation The amounts of the fair cash compensation and of the guaranteed annual payment offered under the Domination Agreement may be increased in special award proceedings initiated by minority shareholders, which may further reduce the funds the Purchaser can otherwise make available to the Company. As of March 30, 2005, several minority shareholders of Celanese GmbH had initiated special award proceedings seeking the court’s review of the amounts of the fair cash compensation and of the guaranteed annual payment offered under the Domination Agreement. As a result of these proceedings, the amount of the fair cash consideration and the guaranteed annual payment offered under the Domination Agreement could be increased by the court so that all minority shareholders, including those who have already tendered their shares into the mandatory offer and have received the fair cash compensation could claim the respective higher amounts. The court dismissed all of these proceedings in March 2005 on the grounds of inadmissibility. Thirty-three plaintiffs appealed the dismissal, and in January 2006, twenty-three of these appeals were granted by the court. They were remanded back to the court of first instance, where the 20 -------------------------------------------------------------------------------- Table of Contents valuation will be further reviewed. On December 12, 2006, the court of first instance appointed an expert to help determine the value of Celanese GmbH. In the first quarter of 2007, certain minority shareholders that received €66.99 per share as fair cash compensation also filed award proceedings challenging the amount they received as fair cash compensation. The Company received applications for the commencement of award proceedings filed by 79 shareholders against the Purchaser with the Frankfurt District Court requesting the court to set a higher amount for the Squeeze-Out compensation. The motions are based on various alleged shortcomings and mistakes in the valuation of Celanese GmbH done for purposes of the Squeeze-Out. On May 11, 2007, the court of first instance appointed a common representative for those shareholders that have not filed an application on their own. The Company anticipates a report by the valuation expert before the end of 2009. Polyester Staple Antitrust Litigation CNA Holdings, the successor in interest to Hoechst Celanese Corporation (“HCC”), Celanese Americas Corporation and Celanese GmbH (collectively, the “Celanese Entities”) and Hoechst, the former parent of HCC, were named as defendants in two actions (involving 25 individual participants) filed in September 2006 by US purchasers of polyester staple fibers manufactured and sold by HCC. The actions allege that the defendants participated in a conspiracy to fix prices, rig bids and allocate customers of polyester staple sold in the United States. These actions were consolidated in a proceeding by a Multi-District Litigation Panel in the United States District Court for the Western District of North Carolina styled In re Polyester Staple Antitrust Litigation, MDL 1516. On June 12, 2008 the court dismissed these actions against all Celanese Entities in consideration of a payment by the Company of $107 million. This proceeding related to sales by the polyester staple fibers business which Hoechst sold to KoSa, Inc. in 1998. Accordingly, the impact of this settlement is reflected within discontinued operations in the consolidated statements of operations. The Company also previously entered into tolling arrangements with four other alleged US purchasers of polyester staple fibers manufactured and sold by the Celanese Entities. These purchasers were not included in the settlement and one such company filed suit against the Company in December 2008 in the Western District of North Carolina entitled Milliken & Company v. CNA Holdings, Inc., Celanese Americas Corporation and Hoechst AG (No. 8-CV-00578). The Company is actively defending this matter. In 1998, HCC sold its polyester staple business as part of the sale of its Film & Fibers Division to KoSa B.V., f/k/a Arteva B.V. and a subsidiary of Koch Industries, Inc. (“KoSa”). In March 2001 the US Department of Justice (“DOJ”) commenced an investigation of possible price fixing regarding the sales of polyester staple fibers in the US subsequent to the period the Celanese Entities were engaged in the polyester staple fiber business. The Celanese Entities were never named in the DOJ action. As a result of the DOJ action, during August of 2002, Arteva Specialties, S.a.r.l., a subsidiary of KoSa, (“Arteva Specialties”) pled guilty to criminal violation of the Sherman Act related to anti-competitive conduct occurring after the 1998 sale of the polyester staple fiber business and paid a fine of $29 million. In a complaint pending against the Celanese Entities and Hoechst in the United States District Court for the Southern District of New York, Koch Industries, Inc., KoSa, Arteva Specialties and Arteva Services S.a.r.l. seek damages in excess of $371 million which includes indemnification for all damages related to the defendants’ alleged participation in, and failure to disclose, the alleged conspiracy during due diligence. The Company is actively defending this matter. Guarantees The Company has agreed to guarantee or indemnify third parties for environmental and other liabilities pursuant to a variety of agreements, including asset and business divestiture agreements, leases, settlement agreements and various agreements with affiliated companies. Although many of these obligations contain monetary and/or time limitations, others do not provide such limitations. As indemnification obligations often depend on the occurrence of unpredictable future events, the future costs associated with them cannot be determined at this time. 21 -------------------------------------------------------------------------------- Table of Contents The Company has accrued for all probable and reasonably estimable losses associated with all known matters or claims that have been brought to its attention. These known obligations include the following: • Demerger Obligations The Company has obligations to indemnify Hoechst, and its legal successors, for various liabilities under the Demerger Agreement, including for environmental liabilities associated with contamination arising under 19 divestiture agreements entered into by Hoechst prior to the demerger. The Company’s obligation to indemnify Hoechst, and its legal successors, is subject to the following thresholds: • The Company will indemnify Hoechst, and its legal successors, against those liabilities up to €250 million; • Hoechst, and its legal successors, will bear those liabilities exceeding €250 million; however, the Company will reimburse Hoechst, and its legal successors, for one-third of those liabilities for amounts that exceed €750 million in the aggregate. The aggregate maximum amount of environmental indemnifications under the remaining divestiture agreements that provide for monetary limits is approximately €750 million. Three of the divestiture agreements do not provide for monetary limits. Based on the estimate of the probability of loss under this indemnification, the Company had reserves of $33 million and $27 million as of September 30, 2009 and December 31, 2008, respectively, for this contingency. Where the Company is unable to reasonably determine the probability of loss or estimate such loss under an indemnification, the Company has not recognized any related liabilities. The Company has also undertaken in the Demerger Agreement to indemnify Hoechst and its legal successors for liabilities that Hoechst is required to discharge, including tax liabilities, which are associated with businesses that were included in the demerger but were not demerged due to legal restrictions on the transfers of such items. These indemnities do not provide for any monetary or time limitations. The Company has not provided for any reserves associated with this indemnification as it is not probable or estimable. The Company has not made any payments to Hoechst or its legal successors during the nine months ended September 30, 2009 or 2008 in connection with this indemnification. • Divestiture Obligations The Company and its predecessor companies agreed to indemnify third-party purchasers of former businesses and assets for various pre-closing conditions, as well as for breaches of representations, warranties and covenants. Such liabilities also include environmental liability, product liability, antitrust and other liabilities. These indemnifications and guarantees represent standard contractual terms associated with typical divestiture agreements and, other than environmental liabilities, the Company does not believe that they expose the Company to any significant risk. The Company has divested numerous businesses, investments and facilities through agreements containing indemnifications or guarantees to the purchasers. Many of the obligations contain monetary and/or time limitations, ranging from one year to thirty years. The aggregate amount of guarantees provided for under these agreements is approximately $2.3 billion as of September 30, 2009. Other agreements do not provide for any monetary or time limitations. Based on historical claims experience and its knowledge of the sites and businesses involved, the Company believes that it is adequately reserved for these matters. The Company has reserves related to these matters in the aggregate of $33 million as of both September 30, 2009 and December 31, 2008. • Other Obligations The Company is secondarily liable under a lease agreement that the Company assigned to a third party. The lease expires on April 30, 2012. The lease liability for the period from October 1, 2009 to April 30, 2012 is estimated to be approximately $19 million. 22 -------------------------------------------------------------------------------- Table of Contents The Company has agreed to indemnify various insurance carriers for amounts not in excess of the settlements received from claims made against these carriers subsequent to the settlement. The aggregate amount of guarantees under these settlements which is limited in term is approximately $10 million. Asbestos Claims As of September 30, 2009, Celanese Ltd. and/or CNA Holdings, LLC, both US subsidiaries of the Company, are defendants in approximately 517 asbestos cases. During the nine months ended September 30, 2009, 41 new cases were filed against the Company and 84 cases were resolved. Because many of these cases involve numerous plaintiffs, the Company is subject to claims significantly in excess of the number of actual cases. The Company has reserves for defense costs related to claims arising from these matters. The Company believes that there is no significant exposure related to these matters. Purchase Obligations In the normal course of business, the Company enters into commitments to purchase goods and services over a fixed period of time. The Company maintains a number of “take-or-pay” contracts for purchases of raw materials and utilities. As of September 30, 2009, there were outstanding future commitments of $1,854 million under take-or-pay contracts. The Company recognized $20 million of losses related to take-or-pay contract termination costs for the three months ended September 30, 2009 related to the Company’s Pardies, France Project of Closure (see Note 15). The Company does not expect to incur any material losses under take-or-pay contractual arrangements unrelated to the Pardies, France Project of Closure. 13. Derivative Financial Instruments To reduce the interest rate risk inherent in the Company’s variable rate debt, the Company utilizes interest rate swap agreements to convert a portion of the variable rate debt to a fixed rate obligation. These interest rate swap agreements are designated as cash flow hedges. The notional value of the Company’s US dollar interest rate swap agreements as of September 30, 2009 and December 31, 2008 was $1.6 billion and $1.8 billion, respectively. The notional value of the Company’s Euro interest rate swap agreement was €150 million at both September 30, 2009 and December 31, 2008. If an interest rate swap agreement is terminated prior to its maturity, the amount previously recorded in Accumulated other comprehensive income (loss), net, is recognized into earnings over the period that the hedged transaction impacts earnings. If the hedging relationship is discontinued because it is probable that the forecasted transaction will not occur according to the original strategy, any related amounts previously recorded in Accumulated other comprehensive income (loss), net are recognized into earnings immediately. To protect the foreign currency exposure of a net investment in a foreign operation, the Company entered into cross currency swaps with certain financial institutions in 2004. The cross currency swaps and the Euro-denominated portion of the senior term loan were designated as a hedge of a net investment of a foreign operation. Under the terms of the cross currency swap arrangements, the Company paid approximately €13 million in interest and received approximately $16 million in interest on June 15 and December 15 of each year. Upon maturity of the cross currency swap agreements in June 2008, the Company owed €276 million ($426 million) and was owed $333 million. In settlement of the obligation, the Company paid $93 million (net of interest of $3 million) in June 2008. During the year ended December 31, 2008, the Company dedesignated €385 million of the €400 Euro-denominated portion of the term loan, previously designated as a hedge of a net investment of a foreign operation. The remaining €15 million Euro-denominated portion of the term loan was dedesignated as a hedge of a net investment of a foreign operation in June 2009. Prior to the dedesignations, the Company had been using external derivative contracts to offset foreign currency exposures on certain intercompany loans. As a result of the dedesignations, the foreign currency exposure created by the Euro-denominated term loan is expected to offset the foreign currency exposure on certain intercompany loans, decreasing the need for external derivative contracts and reducing the Company’s exposure to external counterparties. 23 -------------------------------------------------------------------------------- Table of Contents The Company enters into foreign currency forwards and swaps to minimize its exposure to foreign currency fluctuations. Through these instruments, the Company mitigates its foreign currency exposure on transactions with third party entities as well as intercompany transactions. The forward currency forwards and swaps are not designated as hedges under FASB ASC 815, Derivatives and Hedging. Gains and losses on foreign currency forwards and swaps entered into to offset foreign exchange impacts on intercompany balances are classified as Other income (expense), net, in the unaudited interim consolidated statements of operations. Gains and losses on foreign currency forwards and swaps entered into to offset foreign exchange impacts on all other assets and liabilities are classified as Foreign exchange gain (loss), net, in the unaudited interim consolidated statements of operations. The notional value of the Company’s foreign currency forwards and swaps as of September 30, 2009 and December 31, 2008 were both $1 billion. The following table presents information regarding changes in the fair value of the Company’s derivative arrangements: Three Months Ended Nine Months Ended September 30, 2009 September 30, 2009 Gain (Loss) Gain (Loss) Recognized in Other Gain (Loss) Recognized in Other Gain (Loss) Comprehensive Recognized in Comprehensive Recognized in Income Income Income Income (In $ millions) Derivatives designated as cash flow hedging instruments Interest rate swaps (20) (2) (17) (1) (33) (2) (44) (1) Derivatives designated as net investment hedging instruments Euro-denominated term loan - - - - Derivatives not designated as hedging instruments Foreign currency forwards and swaps - (7) - (22) Total (20) (24) (33) (66) (1) Amount represents reclassification from Accumulated other comprehensive income (loss), net, and is classified as Interest expense in the unaudited interim consolidated statements of operations. (2) Amount excludes tax effect of $4 million recognized in Other comprehensive income (loss). See Note 14 for additional information regarding the fair value of the Company’s derivative arrangements. 14. Fair Value Measurements On January 1, 2009, the Company adopted the provisions of FASB ASC 820, Fair Value Measurements and Disclosures (“FASB ASC 820”) for nonrecurring fair value measurements of non-financial assets and liabilities, such as goodwill, indefinite-lived intangible assets, property, plant and equipment and asset retirement obligations. The adoption did not have a material impact on the Company’s financial position, results of operations or cash flows. FASB ASC 820 establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows: Level 1 — unadjusted quoted prices for identical assets or liabilities in active markets accessible by the Company Level 2 — inputs that are observable in the marketplace other than those inputs classified as Level 1 Level 3 — inputs that are unobservable in the marketplace and significant to the valuation 24 -------------------------------------------------------------------------------- Table of Contents FASB ASC 820 requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs. If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation. The Company’s financial assets and liabilities are measured at fair value on a recurring basis and include securities available for sale and derivative financial instruments. Securities available for sale include US government and corporate bonds, mortgage-backed securities and equity securities. Derivative financial instruments include interest rate swaps and foreign currency forwards and swaps. Marketable Securities. Where possible, the Company utilizes quoted prices in active markets to measure debt and equity securities; such items are classified as Level 1 in the hierarchy and include equity securities and US government bonds. When quoted market prices for identical assets are unavailable, varying valuation techniques are used. Common inputs in valuing these assets include, among others, benchmark yields, issuer spreads, forward mortgage-backed securities trade prices and recently reported trades. Such assets are classified as Level 2 in the hierarchy and typically include mortgage-backed securities, corporate bonds and other US government securities. Derivatives. Derivative financial instruments are valued in the market using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 inputs such as interest rates and foreign currency exchange rates. These market inputs are utilized in the discounted cash flow calculation considering the instrument’s term, notional amount, discount rate and credit risk. Significant inputs to the derivative valuation for interest rate swaps and foreign currency forwards and swaps are observable in the active markets and are classified as Level 2 in the hierarchy. 25 -------------------------------------------------------------------------------- Table of Contents The following fair value hierarchy table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis: Fair Value Measurement Using Quoted Prices in Active Markets for Significant Other Identical Assets Observable Inputs (Level 1) (Level 2) Total (In $ millions) Marketable securities, at fair value US government debt securities - 33 33 US corporate debt securities - 1 1 Total debt securities - 34 34 Equity securities 50 - 50 Money market deposits and other securities - 3 3 Derivatives not designated as hedging instruments Foreign currency forwards and swaps - 13 13 (1) Total assets as of September 30, 2009 50 50 100 Derivatives designated as cash flow hedging instruments Interest rate swaps - (67) (67) (2) Interest rate swaps - (55) (55) (3) Derivatives not designated as hedging instruments Foreign currency forwards and swaps - (9) (9) (2) Total liabilities as of September 30, 2009 - (131) (131) Marketable securities, at fair value US government debt securities - 52 52 US corporate debt securities - 3 3 Total debt securities - 55 55 Equity securities 42 - 42 Money market deposits and other securities - 3 3 Derivatives not designated as hedging instruments Foreign currency forwards and swaps - 54 54 (1) Total assets as of December 31, 2008 42 112 154 Derivatives designated as cash flow hedging instruments Interest rate swaps - (42) (42) (2) Interest rate swaps - (76) (76) (3) Derivatives not designated as hedging instruments Foreign currency forwards and swaps - (25) (25) (2) Total liabilities as of December 31, 2008 - (143) (143) (1) Included in current Other assets in the unaudited consolidated balance sheets. (2) Included in current Other liabilities in the unaudited consolidated balance sheets. (3) Included in noncurrent Other liabilities in the unaudited consolidated balance sheets. Certain assets and liabilities are measured at fair value on a nonrecurring basis and therefore, are not included in the table above. These include assets measured at cost that have to be tested for impairment on an annual basis by comparing fair value to carrying value. 26 -------------------------------------------------------------------------------- Table of Contents The Company performed its annual goodwill impairment test during the three months ended September 30, 2009 using June 30 balances. Recoverability of goodwill was determined based on Level 3 inputs using a combination of both a discounted cash flow model incorporating discount rates commensurate with the risks involved for each reporting unit and the market approach which utilized comparable company data. In connection with this annual impairment test, the Company did not record an impairment loss related to goodwill (see Note 6). The Company performed its annual impairment test of indefinite-lived intangible assets during the three months ended September 30, 2009 using June 30 balances. In connection with this annual impairment test, the Company recorded an impairment loss of less than $1 million to indefinite-lived intangible assets. The measurement of fair value was determined based on Level 3 inputs using a relief from royalty method to determine the estimated fair value for each indefinite-lived intangible asset (see Note 6). The Company determined certain long-lived assets associated with its Pardies, France facility were impaired during the three months ended September 30, 2009 determined based on Level 3 inputs using a discounted cash flow model (see Note 3 and Note 15). Summarized below are the carrying values and estimated fair values of financial instruments that are not carried at fair value on our consolidated balance sheets: As of September 30, As of December 31, 2009 2008 Carrying Fair Carrying Fair Amount Value Amount Value (In $ millions) Cost investments 184 - 184 - Insurance contracts in nonqualified pension trusts 67 67 67 67 Long-term debt, including current installments of long-term debt 3,390 3,224 3,381 2,404 In general, the cost investments included in the table above are not publicly traded and their fair values are not readily determinable; however, the Company believes the carrying values approximate or are less than the fair values. As of September 30, 2009 and December 31, 2008, the fair values of cash and cash equivalents, receivables, trade payables, short-term debt and the current installments of long-term debt approximate carrying values due to the short-term nature of these instruments. These items have been excluded from the table. Additionally, certain noncurrent receivables, principally insurance recoverables, are carried at net realizable value. The fair value of long-term debt is based on valuations from third-party banks and market quotations. 15. Other (Charges) Gains, Net The components of Other (charges) gains, net, are as follows: Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 (In $ millions) Employee termination benefits (65) (8) (94) (19) Plant/office closures (20) - (20) (7) Ticona Kelsterbach plant relocation (see Note 19) (4) (3) (10) (8) Plumbing actions - - 3 - Insurance recoveries associated with Clear Lake, Texas - 23 6 23 Sorbates antitrust actions (see Note 12) - 8 - 8 Asset impairments (7) (21) (8) (21) Total (96) (1) (123) (24) 27 -------------------------------------------------------------------------------- Table of Contents During the first quarter of 2009, the Company began efforts to align production capacity and staffing levels with the Company’s view of an economic environment of prolonged lower demand. For the nine months ended September 30, 2009, Other charges included employee termination benefits of $33 million related to this endeavor. As a result of the shutdown of the vinyl acetate monomer (“VAM”) production unit in Cangrejera, Mexico, the Company recognized employee termination benefits of $1 million and long-lived asset impairment losses of $1 million during the nine months ended September 30, 2009. The VAM production unit in Cangrejera, Mexico is included in the Company’s Acetyl Intermediates segment. As a result of the Project of Closure (see Note 3), Other charges for the Company included exit costs of $85 million during the three months ended September 30, 2009, which consisted of $58 million in employee termination benefits, $20 million of contract termination costs and $7 million of long-lived asset impairment losses. The Pardies, France facility is included in the Acetyl Intermediates segment. Due to continued declines in demand in automotive and electronic sectors, the Company announced plans to reduce capacity by ceasing polyester polymer production at its Ticona manufacturing plant in Shelby, North Carolina. Other charges for the three months ended September 30, 2009 included $2 million of employee termination benefits related to this event. The Shelby, North Carolina facility is included in the Advanced Engineered Materials segment. Other charges for the nine months ended September 30, 2009 was partially offset by $6 million of insurance recoveries in satisfaction of claims the Company made related to the unplanned outage of the Company’s Clear Lake, Texas acetic acid facility during 2007, a $2 million decrease in legal reserves for plumbing claims for which the statute of limitations has expired and $1 million of insurance recoveries associated with plumbing cases. Other charges during the three and nine months ended September 30, 2008 primarily included $21 million of long-lived asset impairment losses on the Company’s Pampa, Texas facility, a $23 million recovery of insurance claims associated with the unplanned outage of the Company’s Clear Lake, Texas facility during 2007, and the release of reserves related to the $8 million, net settlement of the Sorbates antitrust actions. Employee termination benefits during 2008 primarily related to the Company’s strategy to simplify and optimize its business portfolio. The changes in the restructuring reserves by business segment are as follows: Advanced Engineered Consumer Industrial Acetyl Materials Specialties Specialties Intermediates Other Total (In $ millions) Employee Termination Benefits Reserve as of December 31, 2008 2 2 6 17 2 29 Restructuring additions 12 6 5 64 7 94 Cash payments (6 ) (4 ) (7 ) (21 ) (5 ) (43 ) Exchange rate changes 1 - - 1 - 2 Reserve as of September 30, 2009 9 4 4 61 4 82 Plant/Office Closures Reserve as of December 31, 2008 - 2 - - 1 3 Restructuring additions - - - 20 - 20 Transfer to demolition accrual (current Other liabilities) - (2 ) - - - (2 ) Cash payments - - - - (1 ) (1 ) Reserve as of September 30, 2009 - - - 20 - 20 Total 9 4 4 81 4 102 28 -------------------------------------------------------------------------------- Table of Contents 16. Income Taxes The Company’s effective income tax rate for the three months ended September 30, 2009 was (714)% compared to (8)% for the three months ended September 30, 2008. The Company’s effective income tax rate for the nine months ended September 30, 2009 was (212)% compared to 17% for the nine months ended September 30, 2008. The decrease in the effective income tax rate was primarily due to a decrease in the valuation allowance on US net deferred tax assets, partially offset by lower earnings in jurisdictions participating in tax holidays, additions to reserves for uncertain tax positions and related interest and an increase in valuation allowances on certain foreign net deferred tax assets. Since 2004, the Company has maintained a valuation allowance against its US net deferred tax assets. FASB ASC 740, Income Taxes, requires the Company to continually assess all available positive and negative evidence to determine whether it is more likely than not that the net deferred tax assets will be realized. In the third quarter of 2009, the Company concluded that, except for certain state net operating and capital loss carryforwards, it is more likely than not that it will realize its net US deferred tax assets. Accordingly, during the three months ended September 30, 2009, the Company recorded a discrete deferred tax benefit of $382 million for the release of the beginning-of-the-year US valuation allowance associated with those US net deferred tax assets expected to be realized in years subsequent to 2009. Absent the $382 million discrete release of the US valuation allowance, the Company’s effective tax rate for the three months ended September 30, 2009 would have been 65% compared to (8)% for the three months ended September 30, 2008, and the Company’s effective income tax rate for the nine months ended September 30, 2009 would have been 35% compared to 17% for the nine months ended September 30, 2008. The increase in the effective income tax rate was primarily due to lower earnings in jurisdictions participating in tax holidays, additions to reserves for uncertain tax positions and related interest and increases in valuation allowances on certain foreign net deferred tax assets. Liabilities for unrecognized tax benefits and related interest and penalties are recorded in Uncertain tax positions and current Other liabilities in the unaudited consolidated balance sheets. For the nine months ended September 30, 2009, the total unrecognized tax benefits, interest and penalties increased by $13 million, of which $11 million related to currency translation adjustments. The Company expects to resolve certain tax matters within the next twelve months due to the conclusion of tax examinations, which could result in a reduction of the Company’s unrecognized tax benefits of $6 million. Equity in net earnings (loss) of affiliates included $19 million in earnings related to a one-time reversal of deferred tax liabilities recorded by the Company’s Polyplastics Co., Ltd equity-method investee due to a foreign tax law enactment. The Company’s Polyplastics Co., Ltd equity-method investment is included in the Advanced Engineered Materials segment. 29 -------------------------------------------------------------------------------- Table of Contents 17. Business Segments Advanced Engineered Consumer Industrial Acetyl Other Materials Specialties Specialties Intermediates Activities Eliminations Consolidated (In $ millions) Three months ended September 30, 2009 Net sales 220 271 236 666 (1) - (89 ) 1,304 Other (charges) gains, net (6 ) (3 ) (2 ) (85 ) - - (96 ) Equity in net earnings (loss) of affiliates 11 - - 2 6 - 19 Earnings (loss) from continuing operations before tax 32 52 44 (9 ) (70 ) - 49 Depreciation and amortization 17 13 14 34 5 - 83 Capital expenditures 5 12 7 7 3 - 34 (3) Three months ended September 30, 2008 Net sales 272 295 378 1,056 (1) - (178 ) 1,823 Other (charges) gains, net (3 ) - - (5 ) 7 - (1 ) Equity in net earnings (loss) of affiliates 12 1 - 1 5 - 19 Earnings (loss) from continuing operations before tax 25 43 18 133 (67 ) - 152 Depreciation and amortization 19 13 15 36 2 - 85 Capital expenditures 16 15 18 21 3 - 73 (4) 30 -------------------------------------------------------------------------------- Table of Contents Advanced Engineered Consumer Industrial Acetyl Other Materials Specialties Specialties Intermediates Activities Eliminations Consolidated (In $ millions) Nine months ended September 30, 2009 Net sales 569 817 745 1,860 (2) 1 (298 ) 3,694 Other (charges) gains, net (19 ) (6 ) (5 ) (86 ) (7 ) - (123 ) Equity in net earnings (loss) of affiliates 26 1 - 5 12 - 44 Earnings (loss) from continuing operations before tax 28 240 73 51 (237 ) - 155 Depreciation and amortization 53 37 41 93 9 - 233 Capital expenditures 15 30 33 23 4 - 105 (3) Goodwill and intangible assets 394 305 64 358 - - 1,121 Total assets 2,131 1,073 770 1,973 2,303 - 8,250 Nine months ended September 30, 2008 Net sales 866 869 1,129 3,219 (2) 1 (547 ) 5,537 Other (charges) gains, net (9 ) (1 ) (4 ) (14 ) 4 - (24 ) Equity in net earnings (loss) of affiliates 32 1 - 3 10 - 46 Earnings (loss) from continuing operations before tax 112 187 55 520 (257 ) - 617 Depreciation and amortization 58 40 43 102 7 - 250 Capital expenditures 43 35 47 62 7 - 194 (4) Goodwill and intangible assets as of December 31, 2008 398 309 73 363 - - 1,143 Total assets as of December 31, 2008 1,867 995 903 2,197 1,204 - 7,166 (1) Includes $89 million and $178 million of inter-segment sales eliminated in consolidation for the three months ended September 30, 2009 and 2008, respectively. (2) Includes $298 million and $547 million of inter-segment sales eliminated in consolidation for the nine months ended September 30, 2009 and 2008, respectively. (3) Includes decrease of $0 and $25 million in accrued capital expenditures for the three and nine months ended September 30, 2009, respectively. (4) Includes decrease of $3 million and $18 million in accrued capital expenditures for the three and nine months ended September 30, 2008, respectively. 31 -------------------------------------------------------------------------------- Table of Contents 18. Earnings Per Share Three Months Ended September 30, 2009 2008 Basic Diluted Basic Diluted (In $ millions, except for share and per share data) Amounts attributable to Celanese Corporation Earnings (loss) from continuing operations 399 399 164 164 Earnings (loss) from discontinued operations - - (6 ) (6 ) Net earnings (loss) 399 399 158 158 Less: Cumulative preferred stock dividends (3 ) - (3 ) - Net earnings (loss) available to common shareholders 396 399 155 158 Weighted-average shares — basic 143,591,231 143,591,231 147,063,241 147,063,241 Dilutive stock options 1,730,977 3,367,888 Dilutive restricted stock units 150,672 418,300 Assumed conversion of preferred stock 12,090,036 12,062,260 Weighted-average shares — diluted 157,562,916 162,911,689 Per share Earnings (loss) from continuing operations 2.76 2.53 1.09 1.01 Earnings (loss) from discontinued operations - - (0.04 ) (0.04 ) Net earnings (loss) 2.76 2.53 1.05 0.97 Nine Months Ended September 30, 2009 2008 Basic Diluted Basic Diluted (In $ millions, except for share and per share data) Amounts attributable to Celanese Corporation Earnings (loss) from continuing operations 483 483 512 512 Earnings (loss) from discontinued operations - - (75 ) (75 ) Net earnings (loss) 483 483 437 437 Less: Cumulative preferred stock dividends (8 ) - (8 ) - Net earnings (loss) available to common shareholders 475 483 429 437 Weighted-average shares — basic 143,542,405 143,542,405 149,976,915 149,976,915 Dilutive stock options 917,156 3,412,357 Dilutive restricted stock units 128,668 556,478 Assumed conversion of preferred stock 12,090,036 12,062,260 Weighted-average shares — diluted 156,678,265 166,008,010 Per share Earnings (loss) from continuing operations 3.31 3.08 3.36 3.08 Earnings (loss) from discontinued operations - - (0.50 ) (0.45 ) Net earnings (loss) 3.31 3.08 2.86 2.63 32 -------------------------------------------------------------------------------- Table of Contents The following securities were not included in the computation of diluted earnings per share as their effect would have been antidilutive: Three Months Nine Months Ended September 30, Ended September 30, 2009 2008 2009 2008 Stock options 604,500 773,750 3,043,187 711,875 Restricted stock units 419,621 66,250 378,625 22,083 Total 1,024,121 840,000 3,421,812 733,958 19. Ticona Kelsterbach Plant Relocation In 2007, the Company finalized a settlement agreement with the Frankfurt, Germany, Airport (“Fraport”) to relocate the Kelsterbach, Germany Ticona business, included in the Advanced Engineered Materials segment, resolving several years of legal disputes related to the planned Fraport expansion. As a result of the settlement, the Company will transition Ticona’s operations from Kelsterbach to the Hoechst Industrial Park in the Rhine Main area in Germany by mid-2011. Under the original agreement, Fraport agreed to pay Ticona a total of €670 million over a five-year period to offset the costs associated with the transition of the business from its current location and the closure of the Kelsterbach plant. In February 2009, the Company announced the Fraport supervisory board approved the acceleration of the 2009 and 2010 payments of €200 million and €140 million, respectively, required by the settlement agreement signed in June 2007. In February 2009, the Company received a discounted amount of €322 million ($412 million) under this agreement. Amounts received from Fraport are accounted for as deferred proceeds and are included in noncurrent Other liabilities in the unaudited consolidated balance sheets. In addition, the Company received €59 million ($75 million) in value-added tax from Fraport which was remitted to the tax authorities in April 2009. Below is a summary of the financial statement impact associated with the Ticona Kelsterbach plant relocation: Nine Months Ended Total From September 30, Inception Through 2009 2008 September 30, 2009 (in $ millions) Proceeds received from Fraport 412 311 749 Costs expensed 10 8 27 Costs capitalized 270 (1) 130 (1) 513 (1) Includes an increase in accrued capital expenditures of $22 million and $8 million for the nine months ended September 30, 2009 and 2008, respectively. 20. Subsequent Events On October 5, 2009, the Company declared a cash dividend of $0.265625 per share on its 4.25% convertible perpetual preferred stock amounting to approximately $2 million and a cash dividend of $0.04 per share on its Series A common stock amounting to approximately $6 million. Both cash dividends are for the period August 3, 2009 to November 1, 2009 and will be paid on November 2, 2009 to holders of record as of October 15, 2009. Subsequent events have been evaluated through the date of issuance, October 27, 2009. 33 -------------------------------------------------------------------------------- Table of Contents Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations In this Quarterly Report on Form 10-Q, the term “Celanese” refers to Celanese Corporation, a Delaware corporation, and not its subsidiaries. The terms the “Company”, “we,” “our” and “us”, refer to Celanese and its subsidiaries on a consolidated basis. The term “Celanese US” refers to our subsidiary, Celanese US Holdings LLC, a Delaware limited liability company, formally known as BCP Crystal US Holdings Corp., a Delaware corporation, and not its subsidiaries. The term “Purchaser” refers to our subsidiary, Celanese Europe Holding GmbH & Co. KG, formerly known as BCP Crystal Acquisition GmbH & Co. KG, a German limited partnership, and not its subsidiaries, except where otherwise indicated. Forward-Looking Statements May Prove Inaccurate Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and other parts of this Quarterly Report on Form 10-Q contain certain forward-looking statements and information relating to us that are based on the beliefs of our management as well as assumptions made by, and information currently available to, us. When used in this document, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and “project” and similar expressions, as they relate to us are intended to identify forward-looking statements. These statements reflect our current views with respect to future events, are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Further, certain forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. The following discussion should be read in conjunction with the Celanese Corporation and Subsidiaries consolidated financial statements as of and for the year ended December 31, 2008, as filed on February 13, 2009 with the Securities and Exchange Commission (“SEC”) as part of the Company’s Annual Report on Form 10-K (the “2008 Form 10-K”) and the unaudited interim consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law. See the Risk Factors section under Part II, Item 1A of this Quarterly Report on Form 10-Q for a description of risk factors that could significantly affect our financial results. In addition, the following factors could cause our actual results to differ materially from those results, performance or achievements that may be expressed or implied by such forward-looking statements. These factors include, among other things: • changes in general economic, business, political and regulatory conditions in the countries or regions in which we operate; • the length and depth of product and industry business cycles particularly in the automotive, electrical, electronics and construction industries; • changes in the price and availability of raw materials, particularly changes in the demand for, supply of, and market prices of ethylene, methanol, natural gas, wood pulp, fuel oil and electricity; • the ability to pass increases in raw material prices on to customers or otherwise improve margins through price increases; • the ability to maintain plant utilization rates and to implement planned capacity additions and expansions; • the ability to reduce production costs and improve productivity by implementing technological improvements to existing plants; • increased price competition and the introduction of competing products by other companies; • changes in the degree of intellectual property and other legal protection afforded to our products; • compliance costs and potential disruption or interruption of production due to accidents or other unforeseen events or delays in construction of facilities; • potential liability for remedial actions under existing or future environmental regulations; 34 -------------------------------------------------------------------------------- Table of Contents • potential liability resulting from pending or future litigation, or from changes in the laws, regulations or policies of governments or other governmental activities in the countries in which we operate; • changes in currency exchange rates and interest rates; and • various other factors, both referenced and not referenced in this Quarterly Report on Form 10-Q. Many of these factors are macroeconomic in nature and are, therefore, beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from those described in this Quarterly Report as anticipated, believed, estimated, expected, intended, planned or projected. We neither intend nor assume any obligation to update these forward-looking statements, which speak only as of their dates. Overview We are a leading global integrated producer of chemicals and advanced materials. We are one of the world’s largest producers of acetyl products, which are intermediate chemicals for nearly all major industries, as well as a leading global producer of high-performance engineered polymers that are used in a variety of high-value end-use applications. As an industry leader, we hold geographically balanced global positions and participate in diversified end-use markets. Our operations are primarily located in North America, Europe and Asia. We combine a demonstrated track record of execution, strong performance built on shared principles and objectives, and a clear focus on growth and value creation. 2009 Significant Events: • We announced the Frankfurt, Germany Airport (“Fraport”) supervisory board approved the acceleration of the 2009 and 2010 payments of €200 million and €140 million, respectively, required by the settlement agreement signed in June 2007. On February 5, 2009, we received a discounted amount of approximately €322 million ($412 million), excluding value-added tax of €59 million ($75 million). • We shut down our vinyl acetate monomer (“VAM”) production unit in Cangrejera, Mexico, and ceased VAM production at the site during the first quarter of 2009. • Standard and Poor’s affirmed our ratings and revised our outlook from positive to stable in February 2009. • We received the American Chemistry Council’s (“ACC”) Responsible Care® Sustained Excellence Award for mid-size companies. The annual award, the most prestigious award given under ACC’s Responsible Care® initiative, recognizes companies for outstanding leadership under ACC’s Environmental Health and Safety performance criteria. • We completed the sale of our polyvinyl alcohol (“PVOH”) business to Sekisui Chemical Co., Ltd. for the net cash purchase price of $168 million, excluding the value of accounts receivable and payable retained by Celanese. • We agreed to a “Project of Closure” for our acetic acid and vinyl acetate monomer production operations at our Pardies, France facility. These operations are expected to cease by December 2009. As a result of the Pardies, France Project of Closure, we have incurred $97 million of exit costs in 2009. We may incur up to an additional $17 million in contingent employee termination benefits related to the Pardies, France Project of Closure. • We announced that Celanese US has amended its $650 million revolving credit facility. The amendment lowered the total revolver commitment to $600 million and increased the first lien senior secured leverage ratio for a period of six quarters, beginning June 30, 2009 and ending December 31, 2010. • We announced the creation of our new and proprietary AOPlus®2 acetic acid technology, which allows for expansion up to 1.5 million tons per reactor. • We successfully started up the previously announced expansion of our acetic acid unit in Nanjing, China. Production is expected to ramp up during the fourth quarter of 2009. Once the expansion is complete, the unit’s capacity will double from 600,000 tons to 1.2 million tons annually. • We announced the expansion of our vinyl acetate/ethylene (“VAE”) manufacturing facility at our Nanjing, China, integrated chemical complex to support continued growth plans throughout Asia. The expanded facility will double our VAE capacity in the region and is expected to be operational in the first half of 2011. 35 -------------------------------------------------------------------------------- Table of Contents Results of Operations Financial Highlights Three Months Ended September 30, Nine Months Ended September 30, % of % of % of % of 2009 Net Sales 2008 Net Sales 2009 Net Sales 2008 Net Sales (unaudited) (In $ millions, except for percentages) Net sales 1,304 100.0 1,823 100.0 3,694 100.0 5,537 100.0 Gross profit 266 20.4 333 18.3 714 19.3 1,147 20.7 Selling, general and administrative expenses (110 ) (8.4 ) (142 ) (7.8 ) (338 ) (9.1 ) (416 ) (7.5 ) Other (charges) gains, net (96 ) (7.4 ) (1 ) (0.1 ) (123 ) (3.3 ) (24 ) (0.4 ) Operating profit 65 5.0 151 8.3 181 4.9 592 10.7 Equity in net earnings (loss) of affiliates 19 1.5 19 1.0 44 1.2 46 0.8 Interest expense (51 ) (3.9 ) (65 ) (3.6 ) (156 ) (4.2 ) (195 ) (3.5 ) Dividend income — cost investments 19 1.5 35 1.9 81 2.2 138 2.5 Earnings (loss) from continuing operations before tax 49 3.8 152 8.3 155 4.2 617 11.1 Amounts attributable to Celanese Corporation Earnings (loss) from continuing operations 399 30.6 164 9.0 483 13.1 512 9.3 Earnings (loss) from discontinued operations - - (6 ) (0.3 ) - - (75 ) (1.4 ) Net earnings (loss) 399 30.6 158 8.7 483 13.1 437 7.9 Depreciation and amortization 83 6.4 85 4.7 233 6.3 250 4.5 As of As of September 30, December 31, 2009 2008 (unaudited) (in $ millions) Short-term borrowings and current installments of long-term debt — third party and affiliates 265 233 Long-term debt 3,312 3,300 Total debt 3,577 3,533 Summary of Consolidated Results for the Three and Nine Months Ended September 30, 2009 compared to the Three and Nine Months Ended September 30, 2008 The economic slowdown that severely impacted the global economy late in 2008 continued to impact net sales and profitability through the third quarter of 2009. Net sales decreased 28% and 33% during the three and nine months ended September 30, 2009, respectively, compared to the same periods in 2008, primarily due to lower volumes and unfavorable foreign currency impacts across all segments and lower prices for acetyl intermediates products. Decreased demand for automotive and industrial products drove the decline in volumes. Volume declines occurred primarily in Europe and the Americas. Demand slightly increased in Asia for most of our major acetyl intermediates products. Selling prices during the period were negatively impacted by lower industry utilization of acetyl intermediates products, particularly in Europe and the Americas, coupled with lower raw material prices. Selling price increases for acetate tow, ultra-high molecular weight polyethylene (“GUR®”) and Vectra® liquid crystal polymer (“LCP”) partially offset the overall decline in net sales. Gross profit declined due to lower net sales. As a percentage of sales, gross profit increased as a result of decreased raw material and energy costs, and depreciation and amortization across all businesses. Depreciation and amortization declines resulted partially from the shutdown of our Pampa, Texas facility and the effects of long-lived asset impairment losses recognized during the fourth quarter of 2008 on depreciation. Selling, general and administrative expenses decreased $32 million and $78 million for the three and nine months ended September 30, 2009, respectively, compared to the same periods in 2008. Selling, general and administrative 36 -------------------------------------------------------------------------------- Table of Contents expenses declined due to our fixed spending reduction efforts, restructuring efficiencies, decreased costs resulting from the shutdown of our Pampa, Texas facility and favorable currency impacts on overall spending. The components of Other (charges) gains, net, are as follows: Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 (unaudited) (In $ millions) Employee termination benefits (65) (8) (94) (19) Plant/office closures (20) - (20) (7) Ticona Kelsterbach plant relocation (4) (3) (10) (8) Plumbing actions - - 3 - Insurance recoveries associated with Clear Lake, Texas - 23 6 23 Sorbates antitrust actions - 8 - 8 Asset impairments (7) (21) (8) (21) Total (96) (1) (123) (24) During the first quarter of 2009, we began efforts to align production capacity and staffing levels with our view of an economic environment of prolonged lower demand. For the nine months ended September 30, 2009, Other charges included employee termination benefits of $33 million related to this endeavor. As a result of the shutdown of the vinyl acetate monomer production unit in Cangrejera, Mexico, we recognized employee termination benefits of $1 million and long-lived asset impairment losses of $1 million during the nine months ended September 30, 2009. The VAM production unit in Cangrejera, Mexico is included in our Acetyl Intermediates segment. As a result of the Project of Closure, Other charges included exit costs of $85 million during the three months ended September 30, 2009, which consisted of $58 million in employee termination benefits, $20 million of contract termination costs and $7 million of long-lived asset impairment losses. The Pardies, France facility is included in the Acetyl Intermediates segment. Due to continued declines in demand in automotive and electronic sectors, we announced our plans to reduce capacity by ceasing polyester polymer production at our Ticona manufacturing plant in Shelby, North Carolina. Other charges for the three months ended September 30, 2009 included $2 million of employee termination benefits related to this event. The Shelby, North Carolina facility is included in the Advanced Engineered Materials segment. Other charges for the nine months ended September 30, 2009 was partially offset by $6 million of insurance recoveries in satisfaction of claims we made related to the unplanned outage of our Clear Lake, Texas acetic acid facility during 2007, a $2 million decrease in legal reserves for plumbing claims for which the statute of limitations has expired and $1 million of insurance recoveries associated with plumbing cases. Other charges during the three and nine months ended September 30, 2008 primarily included $21 million of long-lived asset impairment losses on our Pampa, Texas facility, a $23 million recovery of insurance claims associated with the unplanned outage of our Clear Lake, Texas facility during 2007, and the release of reserves related to the $8 million, net settlement of the Sorbates antitrust actions. Employee termination benefits costs incurred during 2008 related to our continued strategy to simplify and optimize our business portfolio. Operating profit decreased $86 million and $411 million for the three and nine months ended September 30, 2009, respectively, compared to the same periods in 2008. Lower raw material and energy costs and decreased overall spending only partially offset the decline in net sales. Decreased overall spending was the result of our fixed spending reduction efforts. Our effective income tax rate for the three months ended September 30, 2009 was (714)% compared to (8)% for the three months ended September 30, 2008. Our effective income tax rate for the nine months ended September 30, 2009 was (212)% compared to 17% for the nine months ended September 30, 2008. The decrease in the effective income tax rate was primarily due to a decrease in the valuation allowance on US net deferred tax assets, partially 37 -------------------------------------------------------------------------------- Table of Contents offset by lower earnings in jurisdictions participating in tax holidays, additions to reserves for uncertain tax positions and related interest and an increase in valuation allowances on certain foreign net deferred tax assets. Since 2004, we have maintained a valuation allowance against our US net deferred tax assets. FASB Accounting Standards Codification (“FASB ASC”) 740, Income Taxes, requires that we continually assess both positive and negative evidence to determine whether it is more likely than not that the deferred tax assets can be realized prior to their expiration. During the three months ended September 30, 2009, considering all available information, we concluded that, based primarily on cumulative US earnings, it is more likely than not that we will realize the majority of our net deferred tax assets in the US and recorded a discrete deferred tax benefit of $382 million for the release of valuation allowance. Absent the $382 million discrete release of the US valuation allowance in the quarter ending September 30, 2009, our effective tax rate for the three months ended September 30, 2009 would have been 65% compared to (8)% for the three months ended September 30, 2008. Our effective income tax rate for the nine months ended September 30, 2009 would have been 35% compared to 17% for the nine months ended September 30, 2008. The increase in the effective income tax rate would be primarily due to lower earnings in jurisdictions participating in tax holidays, additions to reserves for uncertain tax positions and related interest and increases in valuation allowances on certain foreign net deferred tax assets. Liabilities for unrecognized tax benefits and related interest and penalties are recorded in Uncertain tax positions and current Other liabilities in the accompanying unaudited consolidated balance sheets. For the nine months ended September 30, 2009, the total unrecognized tax benefits, interest and penalties increased by $13 million, of which $11 million related to currency translation adjustments. We expect to resolve certain tax matters within the next twelve months due to the conclusion of tax examinations, which could result in a deduction of our unrecognized tax benefits of $6 million. Equity in net earnings (loss) of affiliates included $19 million in earnings related to a one-time reversal of deferred tax liabilities recorded by our Polyplastics Co., Ltd equity-method investee due to a foreign tax law enactment. Our Polyplastics Co., Ltd equity-method investment is included in the Advanced Engineered Materials segment. Earnings (loss) from discontinued operations for the nine months ended September 30, 2008 primarily related to a legal settlement agreement we entered into in June 2008. Under the settlement agreement, we agreed to pay $107 million to resolve certain legacy items. Because the legal proceeding related to sales by the polyester staple fibers business which Hoechst AG sold to KoSa, Inc. in 1998, the impact of the settlement is reflected within discontinued operations in the current period. See the “Polyester Staple Antitrust Litigation” in Note 12 of the accompanying unaudited interim consolidated financial statements. Earnings (loss) from discontinued operations during the three months ended September 30, 2008 consisted of legal reserves for current legal cases related to discontinued operations. 38 -------------------------------------------------------------------------------- Table of Contents Selected Data by Business Segment Three Months Ended Nine Months Ended September 30, September 30, Change Change 2009 2008 in $ 2009 2008 in $ (unaudited) (in $ millions) Net sales Advanced Engineered Materials 220 272 (52 ) 569 866 (297 ) Consumer Specialties 271 295 (24 ) 817 869 (52 ) Industrial Specialties 236 378 (142 ) 745 1,129 (384 ) Acetyl Intermediates 666 1,056 (390 ) 1,860 3,219 (1,359 ) Other Activities - - - 1 1 - Inter-segment eliminations (89 ) (178 ) 89 (298 ) (547 ) 249 Total 1,304 1,823 (519 ) 3,694 5,537 (1,843 ) Other (charges) gains, net Advanced Engineered Materials (6 ) (3 ) (3 ) (19 ) (9 ) (10 ) Consumer Specialties (3 ) - (3 ) (6 ) (1 ) (5 ) Industrial Specialties (2 ) - (2 ) (5 ) (4 ) (1 ) Acetyl Intermediates (85 ) (5 ) (80 ) (86 ) (14 ) (72 ) Other Activities - 7 (7 ) (7 ) 4 (11 ) Total (96 ) (1 ) (95 ) (123 ) (24 ) (99 ) Operating profit (loss) Advanced Engineered Materials 21 13 8 2 80 (78 ) Consumer Specialties 52 42 10 184 138 46 Industrial Specialties 44 18 26 73 55 18 Acetyl Intermediates (30 ) 100 (130 ) 22 425 (403 ) Other Activities (22 ) (22 ) - (100 ) (106 ) 6 Total 65 151 (86 ) 181 592 (411 ) Earnings (loss) from continuing operations before tax Advanced Engineered Materials 32 25 7 28 112 (84 ) Consumer Specialties 52 43 9 240 187 53 Industrial Specialties 44 18 26 73 55 18 Acetyl Intermediates (9 ) 133 (142 ) 51 520 (469 ) Other Activities (70 ) (67 ) (3 ) (237 ) (257 ) 20 Total 49 152 (103 ) 155 617 (462 ) Depreciation and amortization Advanced Engineered Materials 17 19 (2 ) 53 58 (5 ) Consumer Specialties 13 13 - 37 40 (3 ) Industrial Specialties 14 15 (1 ) 41 43 (2 ) Acetyl Intermediates 34 36 (2 ) 93 102 (9 ) Other Activities 5 2 3 9 7 2 Total 83 85 (2 ) 233 250 (17 ) 39 -------------------------------------------------------------------------------- Table of Contents Factors Affecting Segment Net Sales The chart below sets forth the percentage increase (decrease) in net sales attributable to each of the factors indicated for the following business segments. Volume Price Currency Other Total (unaudited) (in percentages) Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008 Advanced Engineered Materials (14 ) (3 ) (2 ) - (19 ) Consumer Specialties (14 ) 7 (1 ) - (8 ) Industrial Specialties (3 ) (14 ) (1 ) (20 ) (2) (38 ) (1) Acetyl Intermediates (6 ) (30 ) (1 ) - (37 ) Total Company (8 ) (20 ) (1 ) 1 (28 ) Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008 Advanced Engineered Materials (31 ) 1 (4 ) - (34 ) Consumer Specialties (11 ) 7 (2 ) - (6 ) Industrial Specialties (14 ) (9 ) (4 ) (7 ) (2) (34 ) (1) Acetyl Intermediates (12 ) (28 ) (2 ) - (42 ) Total Company (16 ) (17 ) (3 ) 3 (33 ) (1) Includes the effects of the captive insurance companies and the impact of fluctuations in intersegment eliminations. (2) Includes changes related to the sale of PVOH on July 1, 2009. Summary by Business Segment for the Three and Nine Months Ended September 30, 2009 compared to the Three and Nine Months Ended September 30, 2008 Advanced Engineered Materials Three Months Ended Nine Months Ended September 30, September 30, Change Change 2009 2008 in $ 2009 2008 in $ (unaudited) (in $ millions, except for percentages) Net sales 220 272 (52 ) 569 866 (297 ) Net sales variance Volume (14 )% (31 )% Price (3 )% 1 % Currency (2 )% (4 )% Other - - Other (charges) gains, net (6 ) (3 ) (3 ) (19 ) (9 ) (10 ) Operating profit 21 13 8 2 80 (78 ) Operating margin 9.5 % 4.8 % 0.4 % 9.2 % Earnings (loss) from continuing operations before tax 32 25 7 28 112 (84 ) Depreciation and amortization 17 19 (2 ) 53 58 (5 ) 40 -------------------------------------------------------------------------------- Table of Contents Our Advanced Engineered Materials segment develops, produces and supplies a broad portfolio of high-performance technical polymers for application in automotive and electronics products, as well as other consumer and industrial applications. The primary products of Advanced Engineered Materials are polyacetal products (“POM”), polyphenylene sulfide (“PPS”), long fiber reinforced thermoplastics (“LFRT”), polybutylene terephthalate (“PBT”), polyethylene terephthalate (“PET”), ultra-high molecular weight polyethylene (“GUR®”) and LCP. POM, PPS, LFRT, PBT and PET are used in a broad range of products including automotive components, electronics, appliances and industrial applications. GUR® is used in battery separators, conveyor belts, filtration equipment, coatings and medical devices. Primary end markets for LCP are electrical and electronics. Advanced Engineered Materials’ net sales decreased 19% and 34% for the three and nine months ended September 30, 2009, respectively, compared to the same periods in 2008. Significant weakness in the global economy resulted in a dramatic decline in demand for automotive, electrical and electronic products as well as for other industrial products. As a result, sales volumes dropped significantly across all product lines. The decline in sales volumes for the three months ended September 30, 2009 was less significant than the decline in sales volumes for the three months ended June 30, 2009 partially driven by special programs like “Cash for Clunkers” in the United States. Unfavorable foreign currency impacts and lower average pricing furthered the decline in net sales. Operating profit increased by $8 million for the three months ended September 30, 2009 compared to the same period in 2008. Lower volumes and prices were more than offset by significantly lower raw material and energy costs. Higher operating profit was also attributable to decreased overall spending as a result of our fixed spending reduction efforts. Operating profit decreased by $78 million for the nine months ended September 30, 2009 compared to the same period in 2008. Lower raw material and energy costs during the nine months ended September 30, 2009 resulting from reduced volumes and decreased overall spending was only partially offset by the significant decline in net sales. Lower operating profit was also attributable to an increase in other charges relating to employee termination benefits. Our equity affiliates have experienced similar volume reductions due to decreased demand during 2009. As a result, our proportional share of net earnings of these affiliates during the nine months ended September 30, 2009 declined modestly compared to the same period in 2008. Consumer Specialties Three Months Ended Nine Months Ended September 30, September 30, Change Change 2009 2008 in $ 2009 2008 in $ (unaudited) (in $ millions, except for percentages) Net sales 271 295 (24 ) 817 869 (52 ) Net sales variance Volume (14 )% (11 )% Price 7 % 7 % Currency (1 )% (2 )% Other - - Other (charges) gains, net (3 ) - (3 ) (6 ) (1 ) (5 ) Operating profit 52 42 10 184 138 46 Operating margin 19.2 % 14.2 % 22.5 % 15.9 % Earnings (loss) from continuing operations before tax 52 43 9 240 187 53 Depreciation and amortization 13 13 - 37 40 (3 ) Our Consumer Specialties segment consists of our Acetate Products and Nutrinova businesses. Our Acetate Products business primarily produces and supplies acetate tow, which is used in the production of filter products. We 41 -------------------------------------------------------------------------------- Table of Contents also produce acetate flake which is processed into acetate fiber in the form of a tow band. Our Nutrinova business produces and sells Sunett®, a high intensity sweetener, and food protection ingredients, such as sorbates, for the food, beverage and pharmaceutical industries. Decreased volumes in our Acetate and Nutrinova businesses and unfavorable foreign currency impacts contributed to decreased net sales during the three and nine month periods ended September 30, 2009 as compared to 2008. Decreased volumes were primarily due to weakness in underlying demand resulting from the global economic downturn. Decreased flake and tow volumes were substantially offset by increased tow pricing during the period. Operating profit increased by $10 million and $46 million for the three and nine months ended September 30, 2009, respectively, compared to the same periods in 2008 largely due to favorable average pricing, decreased fixed plant spending and improved energy costs. Industrial Specialties Three Months Ended Nine Months Ended September 30, September 30, Change Change 2009 2008 in $ 2009 2008 in $ (unaudited) (in $ millions, except for percentages) Net sales 236 378 (142 ) 745 1,129 (384 ) Net sales variance Volume (3 )% (14 )% Price (14 )% (9 )% Currency (1 )% (4 )% Other (20 )% (1) (7 )% (1) Other (charges) gains, net (2 ) - (2 ) (5 ) (4 ) (1 ) Operating profit 44 18 26 73 55 18 Operating margin 18.6 % 4.8 % 9.8 % 4.9 % Earnings (loss) from continuing operations before tax 44 18 26 73 55 18 Depreciation and amortization 14 15 (1 ) 41 43 (2 ) (1) Includes changes related to the sale of PVOH on July 1, 2009. Our Industrial Specialties segment includes our Emulsions and EVA Performance Polymers businesses. Our Emulsions business is a global leader which produces a broad product portfolio, specializing in vinyl acetate ethylene emulsions, and is a recognized authority on low volatile organic compounds (“VOC”), an environmentally-friendly technology. Our emulsions products are used in a wide array of applications including paints and coatings, adhesives, construction, glass fiber, textiles and paper. EVA Performance Polymers offers a complete line of low-density polyethylene and specialty ethylene vinyl acetate resins and compounds. EVA Performance Polymers’ products are used in many applications including flexible packaging films, lamination film products, hot melt adhesives, medical tubing, automotive, carpeting and solar cell encapsulation films. In July 2009, we completed the sale of our PVOH business to Sekisui Chemical Co., Ltd. (“Sekisui”) for a net cash purchase price of $168 million, excluding the value of accounts receivable and payable retained by Celanese. The transaction resulted in a gain on disposition of $34 million and includes long-term supply agreements between Sekisui and Celanese. Net sales declined during the three months ended September 30, 2009 compared to the same period in 2008 due to the sale of our PVOH business on July 1, 2009 and decreased pricing in our Emulsions and EVA Performance Polymers businesses. Emulsions volumes were flat, as declines in North America were offset by volume increases in Asia and Europe. EVA Performance Polymers’ volumes declined due to production shortfalls related to technical 42 -------------------------------------------------------------------------------- Table of Contents issues at our Edmonton, Alberta, Canada plant at the beginning of the third quarter. Such technical production issues have been resolved and normal operations resumed prior to the end of the third quarter of 2009. Net sales declined during the nine months ended September 30, 2009 compared to the same period in 2008 due primarily to volume and price reductions resulting from the economic downturn. Unfavorable currency impacts also contributed to the decline during the period. Operating profit increased $26 million for the three months ended September 30, 2009 compared to the same period in 2008 due to the $34 million gain on the sale of our PVOH business. Declining net sales were offset by lower raw material and energy costs and reduced overall spending. Reduced spending is attributable to our fixed spending reduction efforts, restructuring efficiencies and favorable foreign currency impacts. Operating profit increased $18 million for the nine months ended September 30, 2009 compared to the same period in 2008, as decreases in raw material and energy costs and reduced overall fixed spending offset lower net sales. Depreciation and amortization for the nine months ended September 30, 2009 included accelerated amortization expense of $5 million related to the AT Plastics trade name. Acetyl Intermediates Three Months Ended Nine Months Ended September 30, September 30, Change Change 2009 2008 in $ 2009 2008 in $ (unaudited) (in $ millions, except for percentages) Net sales 666 1,056 (390 ) 1,860 3,219 (1,359 ) Net sales variance Volume (6 )% (12 )% Price (30 )% (28 )% Currency (1 )% (2 )% Other - - Other (charges) gains, net (85 ) (5 ) (80 ) (86 ) (14 ) (72 ) Operating profit (loss) (30 ) 100 (130 ) 22 425 (403 ) Operating margin (4.5 )% 9.5 % 1.2 % 13.2 % Earnings (loss) from continuing operations before tax (9 ) 133 (142 ) 51 520 (469 ) Depreciation and amortization 34 36 (2 ) 93 102 (9 ) Our Acetyl Intermediates segment produces and supplies acetyl products, including acetic acid, VAM, acetic anhydride and acetate esters. These products are generally used as starting materials for colorants, paints, adhesives, coatings, medicines and more. Other chemicals produced in this segment are organic solvents and intermediates for pharmaceutical, agricultural and chemical products. Net sales decreased significantly during the three and nine months ended September 30, 2009 compared to the same periods in 2008 due to lower prices across all regions, lower volumes and unfavorable currency impacts. Lower volume was driven by a reduction in underlying demand compared to the same periods in 2008, particularly in Europe and in the Americas. Lower industry utilization of acetyl intermediates products in Europe and the Americas coupled with lower raw material and energy prices drove a reduction in selling prices in these regions during the period. Operating profit declined significantly for the three and nine months ended September 30, 2009 compared to the same periods in 2008, primarily as a result of lower volume and prices, offset partially by lower raw material and energy prices, reduced spending due to the shutdown of our Pampa, Texas facility and other reductions in fixed spending. Depreciation and amortization expense declined primarily as a result of the long-lived asset impairment losses recognized in the fourth quarter of 2008 related to our acetic acid and VAM production facility in Pardies, France, the closure of our VAM production unit in Cangrejera, Mexico in February 2009, coupled with lower 43 -------------------------------------------------------------------------------- Table of Contents depreciation expense resulting from the shutdown of our Pampa, Texas facility. Other charges during the nine months ended September 30, 2009 related primarily to the planned shutdown of our Pardies, France facility. In July 2009, we announced that our wholly-owned French subsidiary, Acetex Chimie, completed the consultation procedure with the workers council on its Project of Closure and social plan related to our Pardies, France facility pursuant to which we announced our formal plan to cease all manufacturing operations there and its associated activities. We have agreed with the workers council on a set of measures of assistance aimed at minimizing the effects of the plant’s closing on the Pardies workforce, including training, outplacement, and severance. Other charges included exit costs of $85 million during the three months ended September 30, 2009, which consisted of $58 million in employee termination benefits, $20 million of contract termination costs and $7 million of long-lived asset impairment losses. Other Activities Other Activities primarily consists of corporate center costs, including financing and administrative activities, and the captive insurance companies. Net sales remained flat for the three and nine months ended September 30, 2009. The operating loss for Other Activities decreased $6 million for the nine months ended September 30, 2009 compared to the same period in 2008. The decrease was due largely to $18 million lower selling, general and administrative expenses primarily due to reduced spending on business optimization and finance improvement initiatives. This decrease was offset by increased other charges of $11 million, primarily related to the Sorbates case which occurred during the quarter ended September 30, 2008. The loss from continuing operations before tax decreased $20 million for the nine months ended September 30, 2009, compared to the same period in 2008. This decrease was primarily due to reduced interest expense resulting from lower interest rates on our senior credit facilities, favorable currency impact and lower operating loss discussed above. Liquidity and Capital Resources Our primary source of liquidity is cash generated from operations, available cash and cash equivalents, and dividends from our portfolio of strategic investments. In addition, we have $136 million available for borrowing under our credit-linked revolving facility and $600 million available under our revolving credit facility to assist, if required, in meeting our working capital needs and other contractual obligations. While our contractual obligations, commitments and debt service requirements over the next several years are significant, we continue to believe we will have available resources to meet our liquidity requirements, including debt service, for the remainder of 2009. If our cash flow from operations is insufficient to fund our debt service and other obligations, we may be required to use other means available to us such as increasing our borrowings, reducing or delaying capital expenditures, seeking additional capital or seeking to restructure or refinance our indebtedness. There can be no assurance, however, that we will continue to generate cash flows at or above current levels or that we will be able to maintain our ability to borrow under our revolving credit facilities. As a result of the Pardies, France Project of Closure, we recorded exit costs of $85 million during the three months ended September 30, 2009, which included $58 million in employee termination benefits, $20 million of contract termination costs, and $7 million of long-lived asset impairment losses to Other charges (gains), net, in the accompanying unaudited interim statements of operations. In addition, we recorded $9 million of accelerated depreciation expense for the nine months ended September 30, 2009 and $3 million of environmental remediation reserves for the three months ended September 30, 2009 related to the shutdown of the Pardies, France facility. We may incur up to an additional $17 million in contingent employee termination benefits related to the Pardies, France Project of Closure. We expect that substantially all of the exit costs (except for accelerated depreciation of fixed assets) will result in future cash expenditures over a two-year period. The Pardies, France facility is included in the Acetyl Intermediates segment. Refer to the Acetyl Intermediates section of the MD&A for more detail. On a stand-alone basis, Celanese Corporation has no material assets other than the stock of its subsidiaries and no independent external operations of its own. As such, Celanese Corporation generally will depend on the cash flow 44 -------------------------------------------------------------------------------- Table of Contents of its subsidiaries to meet its obligations under its preferred stock, Series A common stock and the senior credit agreement. Cash Flows Cash and cash equivalents as of September 30, 2009 were $1,293 million, an increase of $617 million from December 31, 2008. Net Cash Provided by Operating Activities Cash flow from operations increased $63 million during the nine months ended September 30, 2009 as compared to the same period in 2008. The increase in net earnings (loss) of $47 and the improvements to trade working capital contributed to the increase in cash flow from operations. Net Cash Provided by (Used in) Investing Activities Net cash from investing activities increased from a cash outflow of $169 million for the nine months ended September 30, 2008 to a cash inflow of $191 million for the same period in 2009. Related to the Ticona Kelsterbach plant relocation, cash proceeds of $412 million more than offset cash spent on capital expenditures of $248 million. Proceeds from the sale of businesses and assets of $168 million, related to the sale of our PVOH business, was an increase of $161 million as compared to the same period in 2008. Fewer capital expenditures and less cash spent on the purchase of marketable securities more than offset the decrease in cash received from the sale of marketable securities. Cash used to settle our cross currency swap of $93 million for the nine months ended September 30, 2008 as compared to no settlements in the same period in 2009 also contributed to the increase. Our cash outflow for capital expenditures was $130 million and $212 million for the nine months ended September 30, 2009 and 2008, respectively. Capital expenditures were primarily related to major replacements of equipment, capacity expansions, major investments to reduce future operating costs and environmental and health and safety initiatives. Capital expenditures are expected to be approximately $185 million for 2009, excluding amounts related to the relocation of our Ticona plant in Kelsterbach. Cash outflows for capital expenditures for our Ticona plant in Kelsterbach are expected to range from $350 million to $370 million during 2009. Net Cash Used in Financing Activities Net cash used in financing activities decreased from a cash outflow of $402 million for the nine months ended September 30, 2008 to a cash outflow of $52 million for the same period in 2009. The $350 million decrease in cash used in financing activities primarily related to cash outflows attributable to the repurchase of shares during the nine months ended September 30, 2008 of $378 million as compared to no shares repurchased during the nine months ended September 30, 2009 which was partially offset by an increase of $25 million in repayments on long-term debt. Debt and Capital On October 5, 2009, we declared a cash dividend of $0.265625 per share on our 4.25% convertible perpetual preferred stock amounting to $2 million and a cash dividend of $0.04 per share on our Series A common stock amounting to $6 million. Both cash dividends are for the period from August 3, 2009 to November 1, 2009 and will be paid on November 2, 2009 to holders of record as of October 15, 2009. In February 2008, our Board of Directors authorized the repurchase of up to $400 million of our Series A common stock. This authorization was increased to $500 million in October 2008. The authorization gives management discretion in determining the conditions under which shares may be repurchased. This repurchase program does not have an expiration date. As of September 30, 2009, we have purchased 9,763,200 shares of our Series A common stock at an average purchase price of $38.68 per share for a total of $378 million pursuant to this authorization. For the nine months ended September 30, 2009, no shares of our Series A common stock were repurchased. 45 -------------------------------------------------------------------------------- Table of Contents As of September 30, 2009, we had total debt of $3,577 million compared to $3,533 million as of December 31, 2008. We were in compliance with all of the covenants related to our debt agreements as of September 30, 2009. Our senior credit agreement consists of $2,280 million of US dollar-denominated and €400 million of Euro-denominated term loans due 2014, a $600 million revolving credit facility terminating in 2013 and a $228 million credit-linked revolving facility terminating in 2014. Borrowings under the senior credit agreement bear interest at a variable interest rate based on LIBOR (for US dollars) or EURIBOR (for Euros), as applicable, or, for US dollar-denominated loans under certain circumstances, a base rate, in each case plus an applicable margin. The applicable margin for the term loans and any loans under the credit-linked revolving facility is 1.75%, subject to potential reductions as defined in the senior credit agreement. As of September 30, 2009, the applicable margin was 1.75%. The term loans under the senior credit agreement are subject to amortization at 1% of the initial principal amount per annum, payable quarterly. The remaining principal amount of the term loans is due on April 2, 2014. As of September 30, 2009, there were $92 million of letters of credit issued under the credit-linked revolving facility and $136 million remained available for borrowing. As of September 30, 2009, there were no outstanding borrowings or letters of credit issued under the revolving credit facility. On June 30, 2009, we entered into an amendment to the senior credit agreement. The amendment reduced the amount available under the revolving credit portion of the senior credit agreement from $650 million to $600 million and increased the first lien senior secured leverage ratio covenant that is applicable when any amount is outstanding under the revolving credit portion of the senior credit agreement. Prior to giving effect to the amendment, the maximum first lien senior secured leverage ratio was 3.90 to 1.00. As amended, the maximum senior secured leverage ratio for the following trailing four-quarter periods is as follows: First Lien Senior Secured Leverage Ratio September 30, 2009 5.75 to 1.00 December 31, 2009 5.25 to 1.00 March 31, 2010 4.75 to 1.00 June 30, 2010 4.25 to 1.00 September 30, 2010 4.25 to 1.00 December 31, 2010 and thereafter 3.90 to 1.00 As a condition to borrowing funds or requesting that letters of credit be issued under the revolving credit facility, our first lien senior secured leverage ratio (as calculated as of the last day of the most recent fiscal quarter for which financial statements have been delivered under the revolving facility) cannot exceed a certain threshold as specified above. Further, our first lien senior secured leverage ratio must be maintained at or below that threshold while any amounts are outstanding under the revolving credit facility. The first lien senior secured leverage ratio is calculated as the ratio of consolidated first lien senior secured debt to earnings before interest, taxes, depreciation and amortization, subject to adjustment identified in the credit agreement. Based on the estimated first lien senior secured leverage ratio for the trailing four quarters at September 30, 2009, our borrowing capacity under the revolving credit facility is $600 million. As of the quarter ended September 30, 2009, we estimate our first lien senior secured leverage ratio to be 4.37 to 1.00 (which would be 5.27 to 1.00 were the revolving credit facility fully drawn). The maximum first lien senior secured leverage ratio under the revolving credit facility for such quarter is 5.75 to 1.00. Our availability in future periods will be based on the first lien senior secured leverage ratio applicable to the future periods. Our senior credit agreement also contains a number of restrictions on certain of our subsidiaries, including, but not limited to, restrictions on their ability to incur indebtedness; grant liens on assets; merge, consolidate, or sell assets; pay dividends or make other restricted payments; make investments; prepay or modify certain indebtedness; engage in transactions with affiliates; enter into sale-leaseback transactions or hedge transactions; or engage in other businesses. The senior credit agreement also contains a number of affirmative covenants and events of default, including a cross default to other debt of certain of our subsidiaries in an aggregate amount equal to more than $40 million and the occurrence of a change of control. Failure to comply with these covenants, or the occurrence of 46 -------------------------------------------------------------------------------- Table of Contents any other event of default, could result in acceleration of the loans and other financial obligations under our senior credit agreement. Contractual Obligations There have been no material revisions to our contractual obligations as filed in our 2008 Form 10-K. Domination Agreement The domination and profit and loss transfer agreement (the “Domination Agreement”) was approved at the Celanese AG (“CAG”) extraordinary shareholders’ meeting on July 31, 2004. The Domination Agreement between CAG and the Purchaser became effective on October 1, 2004 and could not be terminated by the Purchaser in the ordinary course of business until September 30, 2009. Our subsidiaries, Celanese International Holdings Luxembourg S.a.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 CAG for any statutory annual loss incurred by CAG 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 CAG for an annual loss for any period during which the Domination Agreement has been in effect. Off-Balance Sheet Arrangements We have not entered into any material off-balance sheet arrangements. 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 accounting principles generally accepted in the United States of America 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 describe our significant accounting policies in Note 2, Summary of Accounting Policies, of the Notes to Consolidated Financial Statements included in our 2008 Form 10-K. We discuss our critical accounting policies and estimates in MD&A in our 2008 Form 10-K. There have been no material revisions to the critical accounting policies as filed in our 2008 Form 10-K. Recent Accounting Pronouncements See Notes 2 and 14 of the accompanying unaudited interim consolidated financial statements included in this Form 10-Q for a discussion of recent accounting pronouncements. Item 3. Quantitative and Qualitative Disclosures about Market Risk Market risk for our Company has not changed materially from the foreign exchange, interest rate and commodity risks disclosed in Item 7A in our 2008 Form 10-K Item 4. 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 47 -------------------------------------------------------------------------------- Table of Contents Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, 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. 48 -------------------------------------------------------------------------------- Table of Contents PART II — OTHER INFORMATION Item 1. 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 also Note 12 to the unaudited interim consolidated financial statements for a discussion of legal proceedings. There have been no significant developments in the “Legal Proceedings” described in our 2008 Form 10-K other than those disclosed in Note 12 to the unaudited interim consolidated financial statements. Item 1A. Risk Factors There have been no material revisions to the “Risk factors” as filed in our 2008 Form 10-K Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no equity securities of the Company sold by the Company during the three months ended September 30, 2009 that were not registered under the Securities Act of 1933. The table below sets forth information regarding repurchases of our Series A common stock during the three months ended September 30, 2009: 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(2) the Program July 1-31, 2009 - - - $ 122,300,000 August 1-31, 2009 7 $ 26.51 - $ 122,300,000 September 1-30, 2009 - - - $ 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. (2) No shares were purchased during the three months ended September 30, 2009 under our previously announced stock purchase plan. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. 49 -------------------------------------------------------------------------------- Table of Contents Item 6. Exhibits Exhibit Number Description 3.1 Second Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on January 28, 2005). 3.2 Third Amended and Restated By-laws, effective as of October 23, 2008 (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on October 29, 2008). 3.3 Certificate of Designations of 4.25% Convertible Perpetual Preferred Stock (Incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed on January 28, 2005). 10.1 Agreement and General Release, dated August 3, 2009, between the Company and John A. O’Dwyer (filed herewith). 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). 32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document 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 Quarterly 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 Quarterly 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 Quarterly 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. 50 -------------------------------------------------------------------------------- Table of Contents SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this 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: October 27, 2009 By: /s/Steven M. Sterin Name: Steven M. Sterin Title: Senior Vice President and Chief Financial Officer Date: October 27, 2009 51 EX-10.1 2 d69595exv10w1.htm EX-10.1 Exhibit 10.1 [[Image Removed: (CELANESE LOGO)]] AGREEMENT AND GENERAL RELEASE Celanese Corporation, its Subsidiaries and its Affiliates, (“Employer” or “Company”), 1601 West LBJ Freeway, Dallas, Texas 75234 and John O’Dwyer, his heirs, executors, administrators, successors, and assigns (“Employee”), agree that: 1. Last Day of Employment (Retirement Date). The last day of employment with Celanese will be August 31, 2009, or such earlier date mutually agreeable to both the Employer and Employee (the “Retirement Date”). 2. Consideration. In consideration for signing this Agreement and General Release and compliance with the promises made herein, Employer and Employee agree: a. Voluntary Resignation. Employee agrees to voluntarily resign from the Employer effective on the Retirement Date. Effective as of the close of business on such Retirement Date, Executive will resign from all positions he holds as a corporate officer of the Company (including without limitation any positions as an officer, employee and/or director), and from all positions held on behalf of the Company (e.g., external board memberships, internal committee positions). b. Separation Pay. The Company will pay an amount equal to his current annual base salary plus target bonus, for a total payment of $680,000, less any lawful deductions. Such amount shall be paid in installments as follows; (i) the first installment in the amount of $340,000 (representing 50% of the total payment) will be paid immediately upon the commencement of the “payment period”, and (ii) the remaining $340,000 will be paid in thirteen (13) substantially equal (bi-weekly) installments that begin upon the commencement of the “payment period”. For purposes of this Section 2(b), the “payment period” shall mean the period beginning six (6) months and one day following the Retirement Date, whichever is applicable, subject to execution of this Agreement. c. Bonus. Employee will be eligible to receive a prorated bonus payout for 2009 (based on the number of full months of service completed during 2009). The 2009 bonus payout will be paid to the Employee during the 2010 calendar year but in no event later than March 15, 2010. The prorated 2009 bonus payouts will be based on Company performance without modification for Employee’s individual performance (a 1.0 personal modifier). d. Equity and Long-Term Incentive Cash Awards. Pursuant to the terms of the Employee’s Nonqualified Stock Option Agreement dated January 21, 2005, the 359,506 vested stock options shall be exercisable by the Employee through December 31, 2010. Pursuant to the terms of the Employee’s Performance-Based Restricted Stock Unit Agreement dated April 2, 2007, the Employee will vest in a prorated target award of 10,600 RSUs, on January 4, 2011 based on Company achievement of performance metrics. All remaining unvested restricted stock units issued pursuant to the Employee’s Performance-Based Restricted Stock Unit Agreement dated April 2, 2007 shall be canceled on the retirement date with no additional consideration. -1- -------------------------------------------------------------------------------- Pursuant to the terms of the Employee’s Performance-Vesting Restricted Stock Unit Award Agreement dated December 11, 2008, the Employee will vest in a prorated target award of 2,223 RSUs, that will vest on October 14, 2011 based on Company achievement of performance metrics. All remaining unvested restricted stock units issued pursuant to the Employee’s Performance-Vesting Restricted Stock Unit Award Agreement dated December 11, 2008 shall be canceled on the retirement date with no additional consideration. Pursuant to the terms of the Employee’s 2008 Long-Term Incentive Cash Award Agreement dated December 11, 2008, the Employee will vest in a prorated cash award of $99,264, that will be payable on or after March 1, 2010. The remaining unvested cash award issued pursuant to the Employee’s 2008 Long-Term Incentive Cash Award Agreement dated December 11, 2008 shall be canceled on the retirement date with no additional consideration. e. Deferred Compensation Plan. Notwithstanding anything to the contrary in the Employee’s Deferral Agreement dated January 21,2005 (as amended on April 2, 2007, the “Deferral Agreement”), the Employee shall be 100% vested in his Restructured Account under the Celanese Corporation Deferred Compensation Plan (as amended) and the balance of such account (as adjusted for notional investment earnings in accordance with Section 2(b) of the Deferral Agreement), and the amount of any Top-Up Payment under Section 3(b) of such agreement, shall be paid to the Employee in a single cash payment six (6) months and one day following the Retirement Date. f. 2008 Deferred Compensation Plan. The payment of any benefits to Employee under the Celanese Corporation 2008 Deferred Compensation Plan as amended, (the “2008 DCP”) shall continue to be governed by the terms of the 2008 DCP and shall not be affected by this agreement. g. Pension and 401(k) Plan Vesting. Employee is 100% vested in the Celanese Americas Retirement Pension Plan, the Celanese Americas Supplemental Retirement Pension Plan and the Celanese 401(k) plan. h. Unused Vacation. Employee will be entitled to five (5) weeks vacation for 2009. The Employer will pay to Employee wages for any unused vacation for 2009 and any approved vacation carried over from 2008 under the standard procedure for calculating and paying any unused vacation to separated employees. The gross amount due to Employee, less any lawful deductions, will be payable on the earlier of (i) October 1, 2009 or (ii) the date which is six (6) months and one day following the Retirement Date, whichever is applicable, subject to the Employee providing the details of any vacation days utilized during 2008 and 2009 through the exit interview process. i. Company Benefit Plans. Healthcare & dental plan coverage based on the Employee’s current health & dental plan elections will continue until the end of the month in which the Employee separates, in this case August 31, 2009. All other normal company programs (e.g., life insurance, long term disability, 401(k) contributions, etc.) will continue through the Retirement Date. j. COBRA Reimbursement and Continued Medical Plan Coverage. If the Employee elects to continue his coverage (and the coverage of his eligible family members) under the Employer’s medical and dental plans for active employees pursuant to the requirements of the Consolidated Omnibus Reconciliation Act of 1985, as amended (“COBRA”), the Employer will provide twelve (12) months of company-paid COBRA health care coverage if elected by Employee. -2- -------------------------------------------------------------------------------- Upon expiration or termination of COBRA coverage, since Employee meets retiree medical eligibility requirements, Employee will be eligible to enroll in the Celanese Retiree Medical Plan per the provisions of the plan in effect at the time of enrollment. Premiums for retiree medical coverage will be deducted from monthly pension payments. k. Return of Company Property. Employee will surrender to Employer, on his last day of employment, all company materials, including, but not limited to his company car, laptop computer, phone, credit card, calling cards, etc. Employee will be responsible for resolving any outstanding balances on the company credit card. l. Withholding. The payments and other benefits provided under this Agreement shall be reduced by applicable withholding taxes and other lawful deductions. 3. No Consideration Absent Execution of this Agreement. Employee understands and agrees that he would not receive the monies and/or benefits specified in Paragraph “2” above, unless the Employee signs this Agreement and General Release on the signature page without having revoked this Agreement and General Release pursuant to Paragraph 15 below and the fulfillment of the promises contained herein. 4. General Release of Claims. Employee knowingly and voluntarily releases and forever discharges, to the full extent permitted by law, in all countries, including but not limited to the U.S., the Peoples Republic of China (PRC), U.K. and Germany, the Employer, its parent corporation, affiliates, subsidiaries, divisions, predecessors, successors and assigns and the current and former employees, officers, directors and agents thereof (collectively referred to throughout the remainder of this Agreement as “Employer”), of and from any and all claims, known and unknown, asserted and unasserted, Employee has or may have against Employer as of the date of execution of this Agreement and General Release, including, but not limited to, any alleged violation of: • Title VII of the Civil Rights Act of 1964, as amended; • The Civil Rights Act of 1991; • Sections 1981 through 1988 of Title 42 of the United States Code, as amended; • The Employee Retirement Income Security Act of 1974, as amended; • The Immigration Reform and Control Act, as amended; • The Americans with Disabilities Act of 1990, as amended; • The Age Discrimination in Employment Act of 1967, as amended; • The Workers Adjustment and Retraining Notification Act, as amended; • The Occupational Safety and Health Act, as amended; • The Sarbanes-Oxley Act of 2002; • The Texas Civil Rights Act, as amended; • The Texas Minimum Wage Law, as amended; • Equal Pay Law for Texas, as amended; • Any other federal, state or local civil or human rights law, or any other local, state or federal law, regulation or ordinance; or any law, regulation or ordinance of a foreign country, including but not limited to the PRC, Federal Republic of Germany and the United Kingdom. • Any public policy, contract, tort, or common law. • The employment, labor and benefits laws and regulations in all countries in addition to the U.S. including but not limited to the U.K. and Germany. • Any claim for costs, fees, or other expenses including attorneys’ fees incurred in these matters. -3- -------------------------------------------------------------------------------- 5. Affirmations. Employee affirms that he has not filed, caused to be filed, or presently is a party to any claim, complaint, or action against Employer in any forum or form. Provided, however, that the foregoing does not affect any right to file an administrative charge with the Equal Employment Opportunity Commission (“EEOC”), subject to the restriction that if any such charge is filed, Employee agrees not to violate the confidentiality provisions of this Agreement and Employee further agrees and covenants that should he or any other person, organization, or other entity file, charge, claim, sue or cause or permit to be filed any charge with the EEOC, civil action, suit or legal proceeding against the Employer involving any matter occurring at any time in the past, Employee will not seek or accept any personal relief (including, but not limited to, monetary award, recovery, relief or settlement) in such charge, civil action, suit or proceeding. Employee further affirms that he has reported all hours worked as of the date of this release and has been paid and/or has received all leave (paid or unpaid), compensation, wages, bonuses, commissions, and/or benefits to which he may be entitled and that no other leave (paid or unpaid), compensation, wages, bonuses, commissions and/or benefits are due to him, except as provided in this Agreement and General Release. Employee furthermore affirms that he has no known workplace injuries or occupational diseases and has been provided and/or has not been denied any leave requested under the Family and Medical Leave Act. 6. Confidentiality. Employee agrees and recognizes that any knowledge or information of any type whatsoever of a confidential nature relating to the business of the Employer or any of its subsidiaries, divisions or affiliates, including, without limitation, all types of trade secrets, client lists or information, employee lists or information, information regarding product development, marketing plans, management organization, operating policies or manuals, performance results, business plans, financial records, or other financial, commercial, business or technical information (collectively “Confidential Information”), must be protected as confidential, not copied, disclosed or used other than for the benefit of the Employer at any time unless and until such knowledge or information is in the public domain through no wrongful act by Employee. Employee further agrees not to divulge to anyone (other than the Employer or any persons employed or designated by the Employer), publish or make use of any such Confidential Information without the prior written consent of the Employer, except by an order of a court having competent jurisdiction or under subpoena from an appropriate government agency. 7. Non-competition/Non-solicitation/Non-hire. Employee acknowledges and recognizes the highly competitive nature of the business of the Employer. Without the express written permission of Celanese, for a period of (52) weeks, following the Retirement Date (the “Restricted Period”), Employee acknowledges and agrees that he will not: (i) directly or indirectly solicit sales of like products similar to those produced or sold by Employer; or (ii) directly engage or become employed with any business that competes with the business of Celanese, including but not limited to: direct sales, supply chain, marketing, or manufacturing for a producer of products similar to those produced or licensed by Celanese. In addition, for (2) years, Employee will not directly or indirectly solicit, nor hire employees of Celanese for employment. However, nothing in this provision shall restrict Employee from owning, solely as an investment, publicly traded securities of any company which is engaged in the business of Celanese if Employee (i) is not a controlling person of, or a member of a group which controls; and (ii) does not, directly or indirectly, own 5% or more of any class of securities of any such company. 8. Governing Law and Interpretation. This Agreement and General Release shall be governed and conformed in accordance with the laws of the State of Texas, without regard to its conflict of laws -4- -------------------------------------------------------------------------------- provision. In the event the Employee or Employer breaches any provision of this Agreement and General Release, Employee and Employer affirm that either may institute an action to specifically enforce any term or terms of this Agreement and General Release. Should any provision of this Agreement and General Release be declared illegal or unenforceable by any court of competent jurisdiction and cannot be modified to be enforceable, excluding the general release language, such provision shall immediately become null and void, leaving the remainder of this Agreement and General Release in full force and effect. 9. Non-admission of Wrongdoing. The parties agree that neither this Agreement and General Release nor the furnishing of the consideration for this Release shall be deemed or construed at anytime for any purpose as an admission by Employer of any liability or unlawful conduct of any kind. 10. Neutral Reference. If contacted by another organization, the Employer will only provide dates of employment and that the Employee voluntarily retired from the Company. 11. Non-Disparagement. Employee agrees not to disparage, or make disparaging remarks or send any disparaging communications concerning, the Employer, its reputation, its business, and/or its directors, officers, managers. Likewise the Employer’s senior management agrees not to disparage, or make any disparaging remark or send any disparaging communication concerning Employee, his reputation and/or his business. 12. Future Cooperation after Retirement Date. After retirement, Employee agrees to make reasonable efforts to assist Company including but not limited to: assisting with transition duties, assisting with issues that arise after retirement of employment and assisting with the defense or prosecution of any lawsuit or claim. This includes but is not limited to providing deposition testimony, attending hearings and testifying on behalf of the Company. The Company will reimburse Employee for reasonable time and expenses in connection with any future cooperation after the retirement date. Time and expenses can include loss of pay or using vacation time at a future employer. The Company shall reimburse the Employee within 30 days of remittance by Employee to the Company of such time and expenses incurred. 13. Injunctive Relief. Employee agrees and acknowledges that the Employer will be irreparably harmed by any breach, or threatened breach by him of this Agreement and that monetary damages would be grossly inadequate. Accordingly, he agrees that in the event of a breach, or threatened breach by him of this Agreement the Employer shall be entitled to apply for immediate injunctive or other preliminary or equitable relief, as appropriate, in addition to all other remedies at law or equity. 14. Review Period. Employee is hereby advised he has until September 14, 2009, or forty-five (45) calendar days, to review this Agreement and General Release and to consult with an attorney prior to execution of this Agreement and General Release. Employee agrees that any modifications, material or otherwise, made to this Agreement and General Release do not restart or affect in any manner the original forty-five (45) calendar day consideration period. 15. Revocation Period and Effective Date. In the event that Employee elects to sign and return to the Company a copy of this Agreement, he has a period of seven (7) days (the “Revocation Period”) following the date of such execution to revoke this Agreement and General Release, after which time this agreement will become effective (the “Effective Date”) if not previously revoked. In order for the revocation to be effective, written notice must be received by the Company no later than close of -5- -------------------------------------------------------------------------------- business on the seventh day after the Employee signs this Agreement and General Release at which time the Revocation Period shall expire. 16. Amendment. This Agreement and General Release may not be modified, altered or changed except upon express written consent of both parties wherein specific reference is made to this Agreement and General Release. 17. Entire Agreement. This Agreement and General Release sets forth the entire agreement between the parties hereto, and fully supersedes any prior obligation of the Employer to the Employee. Employee acknowledges that he has not relied on any representations, promises, or agreements of any kind made to him in connection with his decision to accept this Agreement and General Release, except for those set forth in this Agreement and General Release. 18. HAVING ELECTED TO EXECUTE THIS AGREEMENT AND GENERAL RELEASE, TO FULFILL THE PROMISES AND TO RECEIVE THE SUMS AND BENEFITS IN PARAGRAPH “2” ABOVE, EMPLOYEE FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, ENTERS INTO THIS AGREEMENT AND GENERAL RELEASE INTENDING TO WAIVE, SETTLE AND RELEASE ALL CLAIMS HE HAS OR MIGHT HAVE AGAINST EMPLOYER. IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this Release as of the date set forth below. EMPLOYEE Celanese Corporation: By: /s/ John A. O’Dwyer By: /s/ Michael Summers John A. O’Dwyer Michael Summers Date: August 5, 2009 Date: August 3, 2009 -6- EX-31.1 3 d69595exv31w1.htm EX-31.1 Exhibit 31.1 CERTIFICATION PURSUANT TO 17 CFR 240.13a-14 PROMULGATED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, David N. Weidman, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Celanese Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; (c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. /s/David N. Weidman David N. Weidman Chairman of the Board of Directors and Chief Executive Officer Date: October 27, 2009 EX-31.2 4 d69595exv31w2.htm EX-31.2 Exhibit 31.2 CERTIFICATION PURSUANT TO 17 CFR 240.13a-14 PROMULGATED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Steven M. Sterin, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Celanese Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; (c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. /s/Steven M. Sterin Steven M. Sterin Senior Vice President and Chief Financial Officer Date: October 27, 2009 EX-32.1 5 d69595exv32w1.htm EX-32.1 Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Celanese Corporation (the “Company”) on Form 10-Q for the period ending September 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David N. Weidman, Chairman of the Board of Directors and Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/David N. Weidman David N. Weidman Chairman of the Board of Directors and Chief Executive Officer Date: October 27, 2009 EX-32.2 6 d69595exv32w2.htm EX-31.1 Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Celanese Corporation (the “Company”) on Form 10-Q for the period ending September 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven M. Sterin, Senior Vice President and Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/Steven M. Sterin Steven M. Sterin Senior Vice President and Chief Financial Officer Date: October 27, 2009