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EX-31.2 - EXHIBIT 31.2 - Celanese Corpex312033116.htm
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EX-10.3 - EXHIBIT 10.3 - Celanese Corpex103-10q12016.htm
EX-10.2 - EXHIBIT 10.2 - Celanese Corpex102-10q12016.htm
EX-10.1 - EXHIBIT 10.1 - Celanese Corpex101-10q12016.htm

 
 
 
 
 
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 March 31, 2016
 
Or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Commission File Number) 001-32410
CELANESE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
98-0420726
(I.R.S. Employer
Identification No.)
 
 
222 W. Las Colinas Blvd., Suite 900N
Irving, TX
(Address of Principal Executive Offices)
75039-5421
(Zip Code)
(972) 443-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ  No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No þ
The number of outstanding shares of the registrant's Series A common stock, $0.0001 par value, as of April 12, 2016 was 147,445,193.
 
 
 
 
 



CELANESE CORPORATION AND SUBSIDIARIES
Form 10-Q
For the Quarterly Period Ended March 31, 2016
TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 


2




Item 1. Financial Statements 
CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended
March 31,
 
2016
 
2015
 
(In $ millions, except share and per share data)
Net sales
1,404

 
1,450

Cost of sales
(1,014
)
 
(1,069
)
Gross profit
390

 
381

Selling, general and administrative expenses
(80
)
 
(98
)
Amortization of intangible assets
(2
)
 
(3
)
Research and development expenses
(19
)
 
(20
)
Other (charges) gains, net
(5
)
 
(5
)
Foreign exchange gain (loss), net
3

 
3

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

 
(1
)
Operating profit (loss)
287

 
257

Equity in net earnings (loss) of affiliates
38

 
48

Interest expense
(33
)
 
(27
)
Refinancing expense
(2
)
 

Interest income
1

 

Dividend income - cost investments
27

 
28

Other income (expense), net

 

Earnings (loss) from continuing operations before tax
318

 
306

Income tax (provision) benefit
(60
)
 
(72
)
Earnings (loss) from continuing operations
258

 
234

Earnings (loss) from operation of discontinued operations
1

 

Income tax (provision) benefit from discontinued operations

 

Earnings (loss) from discontinued operations
1

 

Net earnings (loss)
259

 
234

Net (earnings) loss attributable to noncontrolling interests
(2
)
 
2

Net earnings (loss) attributable to Celanese Corporation
257

 
236

Amounts attributable to Celanese Corporation
 

 
 

Earnings (loss) from continuing operations
256

 
236

Earnings (loss) from discontinued operations
1

 

Net earnings (loss)
257

 
236

Earnings (loss) per common share - basic
 

 
 

Continuing operations
1.74

 
1.54

Discontinued operations

 

Net earnings (loss) - basic
1.74

 
1.54

Earnings (loss) per common share - diluted
 

 
 

Continuing operations
1.73

 
1.53

Discontinued operations

 

Net earnings (loss) - diluted
1.73

 
1.53

Weighted average shares - basic
147,413,234

 
153,216,510

Weighted average shares - diluted
148,131,114

 
153,901,562


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

3



CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
 
Three Months Ended
March 31,
 
2016
 
2015
 
(In $ millions)
Net earnings (loss)
259

 
234

Other comprehensive income (loss), net of tax
 

 
 

Unrealized gain (loss) on marketable securities
1

 

Foreign currency translation
64

 
(156
)
Gain (loss) on cash flow hedges

 
2

Pension and postretirement benefits

 
(3
)
Total other comprehensive income (loss), net of tax
65

 
(157
)
Total comprehensive income (loss), net of tax
324

 
77

Comprehensive (income) loss attributable to noncontrolling interests
(2
)
 
2

Comprehensive income (loss) attributable to Celanese Corporation
322

 
79


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


4



CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
 
As of
March 31,
2016
 
As of
December 31,
2015
 
(In $ millions, except share data)
ASSETS
 
 
 
Current Assets
 

 
 

Cash and cash equivalents (variable interest entity restricted - 2016: $18; 2015: $7)
716

 
967

Trade receivables - third party and affiliates (net of allowance for doubtful accounts - 2016: $6; 2015: $6; variable interest entity restricted - 2016: $5; 2015: $6)
830

 
706

Non-trade receivables, net
212

 
285

Inventories
667

 
682

Deferred income taxes

 
68

Marketable securities, at fair value
31

 
30

Other assets
47

 
49

Total current assets
2,503

 
2,787

Investments in affiliates
870

 
838

Property, plant and equipment (net of accumulated depreciation - 2016: $2,132; 2015: $2,039; variable interest entity restricted - 2016: $763; 2015: $772)
3,640

 
3,609

Deferred income taxes
236

 
222

Other assets (variable interest entity restricted - 2016: $10; 2015: $13)
296

 
300

Goodwill
722

 
705

Intangible assets (net of accumulated amortization - 2016: $546; 2015: $528; variable interest entity restricted - 2016: $27; 2015: $27)
125

 
125

Total assets
8,392

 
8,586

LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 

 
 

Short-term borrowings and current installments of long-term debt - third party and affiliates
116

 
513

Trade payables - third party and affiliates
574

 
587

Other liabilities
280

 
330

Deferred income taxes

 
30

Income taxes payable
125

 
90

Total current liabilities
1,095

 
1,550

Long-term debt, net of unamortized deferred financing costs
2,487

 
2,468

Deferred income taxes
116

 
136

Uncertain tax positions
176

 
167

Benefit obligations
1,176

 
1,189

Other liabilities
244

 
247

Commitments and Contingencies


 


Stockholders' Equity
 

 
 

Preferred stock, $0.01 par value, 100,000,000 shares authorized (2016 and 2015: 0 issued and outstanding)

 

Series A common stock, $0.0001 par value, 400,000,000 shares authorized (2016: 167,355,679 issued and 147,439,189 outstanding; 2015: 166,698,787 issued and 146,782,297 outstanding)

 

Series B common stock, $0.0001 par value, 100,000,000 shares authorized (2016 and 2015: 0 issued and outstanding)

 

Treasury stock, at cost (2016 and 2015: 19,916,490 shares)
(1,031
)
 
(1,031
)
Additional paid-in capital
125

 
136

Retained earnings
3,834

 
3,621

Accumulated other comprehensive income (loss), net
(283
)
 
(348
)
Total Celanese Corporation stockholders' equity
2,645

 
2,378

Noncontrolling interests
453

 
451

Total equity
3,098

 
2,829

Total liabilities and equity
8,392

 
8,586

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

5



CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENT OF EQUITY
 
Three Months Ended
March 31, 2016
 
Shares
 
Amount
 
(In $ millions, except share data)
Series A Common Stock
 
 
 
Balance as of the beginning of the period
146,782,297

 

Stock option exercises
30,000

 

Purchases of treasury stock

 

Stock awards
626,892

 

Balance as of the end of the period
147,439,189

 

Treasury Stock
 

 
 

Balance as of the beginning of the period
19,916,490

 
(1,031
)
Purchases of treasury stock, including related fees

 

Balance as of the end of the period
19,916,490

 
(1,031
)
Additional Paid-In Capital
 
 
 
Balance as of the beginning of the period
 
 
136

Stock-based compensation, net of tax
 
 
(12
)
Stock option exercises, net of tax
 
 
1

Balance as of the end of the period
 
 
125

Retained Earnings
 
 
 
Balance as of the beginning of the period
 
 
3,621

Net earnings (loss) attributable to Celanese Corporation
 
 
257

Series A common stock dividends
 
 
(44
)
Balance as of the end of the period
 
 
3,834

Accumulated Other Comprehensive Income (Loss), Net
 
 
 
Balance as of the beginning of the period
 
 
(348
)
Other comprehensive income (loss), net of tax
 
 
65

Balance as of the end of the period
 
 
(283
)
Total Celanese Corporation stockholders' equity
 
 
2,645

Noncontrolling Interests
 
 
 
Balance as of the beginning of the period
 
 
451

Net earnings (loss) attributable to noncontrolling interests
 
 
2

Contributions from noncontrolling interests
 
 

Balance as of the end of the period
 
 
453

Total equity
 
 
3,098


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



6



CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Three Months Ended
March 31,
 
2016
 
2015
 
(In $ millions)
Operating Activities
 
 
 
Net earnings (loss)
259

 
234

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

 

Depreciation, amortization and accretion
74

 
68

Pension and postretirement net periodic benefit cost
(13
)
 
(12
)
Pension and postretirement contributions
(14
)
 
(29
)
Deferred income taxes, net
(2
)
 
5

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

 
1

Stock-based compensation
10

 
12

Undistributed earnings in unconsolidated affiliates
(1
)
 
39

Other, net
4

 
3

Operating cash provided by (used in) discontinued operations
(1
)
 
(1
)
Changes in operating assets and liabilities
 
 
 
Trade receivables - third party and affiliates, net
(111
)
 
(34
)
Inventories
29

 
6

Other assets
40

 
45

Trade payables - third party and affiliates
(8
)
 
(58
)
Other liabilities
21

 
(9
)
Net cash provided by (used in) operating activities
287

 
270

Investing Activities
 
 
 
Capital expenditures on property, plant and equipment
(70
)
 
(64
)
Acquisitions, net of cash acquired

 

Proceeds from sale of businesses and assets, net

 

Capital expenditures related to Fairway Methanol LLC

 
(98
)
Other, net
(5
)
 
(11
)
Net cash provided by (used in) investing activities
(75
)
 
(173
)
Financing Activities
 

 
 

Net change in short-term borrowings with maturities of 3 months or less
(344
)
 
4

Proceeds from short-term borrowings
8

 
16

Repayments of short-term borrowings
(63
)
 
(29
)
Proceeds from long-term debt
170

 

Repayments of long-term debt
(177
)
 
(6
)
Purchases of treasury stock, including related fees

 

Stock option exercises
1

 

Series A common stock dividends
(44
)
 
(38
)
Contributions from noncontrolling interests

 
80

Other, net
(24
)
 
(10
)
Net cash provided by (used in) financing activities
(473
)
 
17

Exchange rate effects on cash and cash equivalents
10

 
(43
)
Net increase (decrease) in cash and cash equivalents
(251
)
 
71

Cash and cash equivalents as of beginning of period
967

 
780

Cash and cash equivalents as of end of period
716

 
851


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

7



CELANESE CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. Description of the Company and Basis of Presentation
Description of the Company
Celanese Corporation and its subsidiaries (collectively, the "Company") is a global technology and specialty materials company. The Company's business involves processing chemical raw materials, such as methanol, carbon monoxide and ethylene, and natural products, including wood pulp, into value-added chemicals, thermoplastic polymers and other chemical-based products.
Definitions
In this Quarterly Report on Form 10-Q ("Quarterly Report"), the term "Celanese" refers to Celanese Corporation, a Delaware corporation, and not its subsidiaries. The term "Celanese US" refers to the Company's subsidiary, Celanese US Holdings LLC, a Delaware limited liability company, and not its subsidiaries.
Basis of Presentation
The unaudited interim consolidated financial statements for the three months ended March 31, 2016 and 2015 contained in this Quarterly Report were prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") for all periods presented and include the accounts of the Company, its majority owned subsidiaries over which the Company exercises control and, when applicable, variable interest entities in which the Company is the primary beneficiary. The unaudited interim consolidated financial statements and other financial information included in this Quarterly Report, unless otherwise specified, have been presented to separately show the effects of discontinued operations.
In the opinion of management, the accompanying unaudited consolidated balance sheets and related unaudited interim consolidated statements of operations, comprehensive income (loss), cash flows and equity include all adjustments, consisting only of normal recurring items necessary for their fair presentation in conformity with US GAAP. Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP may have been condensed or omitted in accordance with rules and regulations of the Securities and Exchange Commission ("SEC"). These unaudited interim consolidated financial statements should be read in conjunction with the Company's consolidated financial statements as of and for the year ended December 31, 2015, filed on February 5, 2016 with the SEC as part of the Company's Annual Report on Form 10-K.
Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results to be expected for the entire year.
In the ordinary course of business, the Company enters into contracts and agreements relative to a number of topics, including acquisitions, dispositions, joint ventures, supply agreements, product sales and other arrangements. The Company endeavors to describe those contracts or agreements that are material to its business, results of operations or financial position. The Company may also describe some arrangements that are not material but in which the Company believes investors may have an interest or which may have been included in a Form 8-K filing. Investors should not assume the Company has described all contracts and agreements relative to the Company's business in this Quarterly Report.
For those consolidated ventures in which the Company owns or is exposed to less than 100% of the economics, the outside stockholders' interests are shown as noncontrolling interests.
The Company has reclassified certain prior period amounts to conform to the current period's presentation.
Estimates and Assumptions
The preparation of unaudited interim consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited interim consolidated financial statements and the reported amounts of net sales, expenses and allocated charges during the reporting period. Significant estimates pertain to impairments of goodwill, intangible assets and other long-lived assets, purchase price allocations, restructuring costs and other (charges) gains, net, income taxes, pension and other postretirement benefits, asset retirement obligations, environmental liabilities and loss contingencies, among others. Actual results could differ from those estimates.

8



Change in estimate regarding pension and other postretirement benefits
Beginning in 2016, the Company elected to change the method used to estimate the service and interest cost components of net periodic benefit cost for its significant defined benefit pension plans and other postretirement benefit plans. Previously, the Company estimated the service and interest cost components utilizing a single weighted average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. The Company has elected to use a full yield curve approach in the estimation of these components of net periodic benefit cost by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. This change improves the correlation between projected benefit cash flows and the corresponding yield curve spot rates and provides a more precise measurement of service and interest costs. This change does not affect the measurement of the Company's total benefit obligations as the change in service and interest cost will be completely offset in the annual actuarial (gain) loss reported. The Company has accounted for this change as a change in estimate and, accordingly, has accounted for it prospectively beginning in 2016. The Company's adoption of the full yield curve approach will reduce 2016 service and interest cost by approximately $29 million as compared to the previous method.
The discount rates used to measure service and interest cost during 2016 and the discount rates that would have been used for service and interest cost under the Company's previous estimation methodology are as follows:
 
Pension Benefits
 
Postretirement Benefits
 
US
 
International
 
US
 
International
 
(In percentages)
Single weighted average discount rate approach
 
 
 
 
 
 
 
Service and interest cost
4.2
 
2.6
 
4.0
 
3.6
 
 
 
 
 
 
 
 
Full yield curve approach(1)
 
 
 
 
 
 
 
Service cost
4.5
 
3.1
 
4.2
 
3.8
Interest cost
3.4
 
2.2
 
3.1
 
3.1
______________________________
(1) 
Represents the weighted average effective interest rate.
2. Recent Accounting Pronouncements
In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-09, Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. The Company is currently assessing the potential impact of adopting ASU 2016-09 on its financial statements and related disclosures.
In February 2016, the FASB issued ASU 2016-02, Leases ("ASU 2016-02"). ASU 2016-02 supersedes the lease guidance under FASB Accounting Standards Codification ("ASC") Topic 840, Leases, resulting in the creation of FASB ASC Topic 842, Leases. ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for both finance and operating leases. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently assessing the potential impact of adopting ASU 2016-02 on its financial statements and related disclosures.
In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes ("ASU 2015-17"). ASU 2015-17 requires deferred tax liabilities and assets to be classified as noncurrent in a classified statement of financial position. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. The Company has elected to early adopt ASU 2015-17 prospectively during the three months ended March 31, 2016 in accordance with the FASB's disclosure simplification initiatives. The adoption of this ASU resulted in a reclassification from current to noncurrent deferred tax assets and deferred tax liabilities of $68 million and $30 million, respectively. Prior periods were not adjusted.

9



In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory ("ASU 2015-11"). ASU 2015-11 applies to inventory that is measured using the first-in, first-out ("FIFO") or average cost method and requires measurement of that inventory at the lower of cost and net realizable value, instead of lower of cost or market. ASU 2015-11 further clarifies the definition of net realizable value as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. The Company early adopted ASU 2015-11 prospectively during the three months ended March 31, 2016 in accordance with the FASB's disclosure simplification initiatives. The adoption of this ASU did not have a material impact on the Company's financial statements or related disclosures.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). ASU 2014-09 supersedes the revenue recognition requirements of FASB ASC Topic 605, Revenue Recognition and most industry-specific guidance throughout the ASC, resulting in the creation of FASB ASC Topic 606, Revenue from Contracts with Customers. ASU 2014-09 requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. This ASU provides alternative methods of adoption. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers, Deferral of the Effective Date ("ASU 2015-14"). ASU 2015-14 defers the effective date of ASU 2014-09 by one year to December 15, 2017 for fiscal years, and interim periods within those years, beginning after that date and permits early adoption of the standard, but not before the original effective date for fiscal years beginning after December 15, 2016. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) ("ASU 2016-08") clarifying the implementation guidance on principal versus agent considerations. Specifically, an entity is required to determine whether the nature of a promise is to provide the specified good or service itself (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). The determination influences the timing and amount of revenue recognition. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers, Identifying Performance Obligations and Licensing, clarifying the implementation guidance on identifying performance obligations and licensing. Specifically, the amendments reduce the cost and complexity of identifying promised goods or services and improves the guidance for determining whether promises are separately identifiable. The amendments also provide implementation guidance on determining whether an entity's promise to grant a license provides a customer with either a right to use the entity's intellectual property (which is satisfied at a point in time) or a right to access the entity's intellectual property (which is satisfied over time). The effective date and transition requirements for ASU 2016-08 and ASU 2016-10 are the same as the effective date and transition requirements for ASU 2014-09. The Company is currently assessing the potential impact of adopting ASU 2014-09, ASU 2016-08 and ASU 2016-10 on its financial statements and related disclosures.
3. Ventures and Variable Interest Entities
Consolidated Variable Interest Entities
In February 2014, the Company formed a joint venture, Fairway Methanol LLC ("Fairway"), with Mitsui & Co., Ltd., of Tokyo, Japan ("Mitsui"), in which the Company owns 50% of Fairway, for the production of methanol at the Company's integrated chemical plant in Clear Lake, Texas. The methanol unit utilizes natural gas in the US Gulf Coast region as a feedstock and benefits from the existing infrastructure at the Company's Clear Lake facility. Both Mitsui and the Company supply their own natural gas to Fairway in exchange for methanol tolling under a cost-plus off-take arrangement.
The Company determined that Fairway is a variable interest entity ("VIE") in which the Company is the primary beneficiary. Under the terms of the joint venture agreements, the Company provides site services and day-to-day operations for the methanol facility. In addition, the joint venture agreements provide that the Company indemnifies Mitsui for environmental obligations that exceed a specified threshold, as well as an equity option between the partners. Accordingly, the Company consolidates the venture and records a noncontrolling interest for the share of the venture owned by Mitsui. Fairway is included in the Company's Acetyl Intermediates segment.

10



The carrying amount of the assets and liabilities associated with Fairway included in the unaudited consolidated balance sheets are as follows:
 
As of
March 31,
2016
 
As of
December 31,
2015
 
(In $ millions)
Cash and cash equivalents
18

 
7

Trade receivables, net - third party & affiliate
10

 
12

Property, plant and equipment (net of accumulated depreciation - 2016: $20; 2015: $10)
763

 
772

Intangible assets (net of accumulated amortization - 2016: $0; 2015: $0)
27

 
27

Other assets
10

 
13

Total assets(1)
828

 
831

 
 
 
 
Trade payables
7

 
9

Other liabilities(2)
3

 
5

Long-term debt
5

 
5

Deferred income taxes
2

 
2

Total liabilities
17

 
21

______________________________
(1) 
Assets can only be used to settle the obligations of Fairway.
(2) 
Primarily represents amounts owed by Fairway to the Company for reimbursement of expenditures.
Nonconsolidated Variable Interest Entities
The Company holds variable interests in entities that supply certain raw materials and services to the Company. The variable interests primarily relate to cost-plus contractual arrangements with the suppliers and recovery of capital expenditures for certain plant assets plus a rate of return on such assets. Liabilities for such supplier recoveries of capital expenditures have been recorded as capital lease obligations. The entities are not consolidated because the Company is not the primary beneficiary of the entities as it does not have the power to direct the activities of the entities that most significantly impact the entities' economic performance. The Company's maximum exposure to loss as a result of its involvement with these VIEs as of March 31, 2016 relates primarily to the recovery of capital expenditures for certain property, plant and equipment.
The carrying amount of the assets and liabilities associated with the obligations to nonconsolidated VIEs, as well as the maximum exposure to loss relating to these nonconsolidated VIEs are as follows:
 
As of
March 31,
2016
 
As of
December 31,
2015
 
(In $ millions)
Property, plant and equipment, net
70

 
73

 
 
 
 
Trade payables
52

 
47

Current installments of long-term debt
10

 
10

Long-term debt
106

 
109

Total liabilities
168

 
166

 
 
 
 
Maximum exposure to loss
267

 
268

The difference between the total liabilities associated with obligations to unconsolidated VIEs and the maximum exposure to loss primarily represents take-or-pay obligations for services included in the Company's unconditional purchase obligations (Note 16).

11



4. Marketable Securities, at Fair Value
The Company's nonqualified trusts hold available-for-sale securities for funding requirements of the Company's nonqualified pension plans (Note 9) as follows:
 
As of
March 31,
2016
 
As of
December 31,
2015
 
(In $ millions)
Amortized cost
31

 
30

Gross unrealized gain

 

Gross unrealized loss

 

Fair value
31

 
30

5. Inventories
 
As of
March 31,
2016
 
As of
December 31,
2015
 
(In $ millions)
Finished goods
491

 
498

Work-in-process
39

 
43

Raw materials and supplies
137

 
141

Total
667

 
682

6. Current Other Liabilities
 
As of
March 31,
2016
 
As of
December 31,
2015
 
(In $ millions)
Asset retirement obligations
8

 
10

Benefit obligations (Note 9)
31

 
31

Customer rebates
27

 
45

Derivatives (Note 14)
3

 
2

Environmental (Note 10)
13

 
11

Insurance
9

 
10

Interest
16

 
16

Restructuring (Note 12)
26

 
30

Salaries and benefits
68

 
109

Sales and use tax/foreign withholding tax payable
21

 
13

Other
58

 
53

Total
280

 
330


12



7. Noncurrent Other Liabilities
 
As of
March 31,
2016
 
As of
December 31,
2015
 
(In $ millions)
Asset retirement obligations
24

 
26

Deferred proceeds
44

 
43

Deferred revenue
12

 
13

Environmental (Note 10)
58

 
61

Income taxes payable
7

 
7

Insurance
50

 
50

Other
49

 
47

Total
244

 
247

8. Debt
 
As of
March 31,
2016
 
As of
December 31,
2015
 
(In $ millions)
Short-Term Borrowings and Current Installments of Long-Term Debt - Third Party and Affiliates
 
 
 
Current installments of long-term debt
58

 
56

Short-term borrowings, including amounts due to affiliates(1)
58

 
52

Revolving credit facility(2)

 
350

Accounts receivable securitization facility(3)

 
55

Total
116

 
513

______________________________
(1) 
The weighted average interest rate was 2.8% and 3.3% as of March 31, 2016 and December 31, 2015, respectively.
(2) 
The weighted average interest rate was 1.8% as of December 31, 2015.
(3) 
The weighted average interest rate was 0.8% as of December 31, 2015.

13



 
As of
March 31,
2016
 
As of
December 31,
2015
 
(In $ millions)
Long-Term Debt
 
 
 
Senior credit facilities - Term C-2 loan due 2016
31

 
30

Senior credit facilities - Term C-3 loan due 2018
883

 
878

Senior unsecured notes due 2019, interest rate of 3.250%
342

 
327

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

 
400

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

 
500

Pollution control and industrial revenue bonds due at various dates through 2030, interest rates ranging from 5.70% to 6.70%

 
169

Refunding loan for pollution control and industrial revenue bonds due at various dates through 2030, interest rates ranging from 4.05% to 5.00%
170

 

Obligations under capital leases due at various dates through 2054
237

 
238

Subtotal
2,563

 
2,542

Unamortized debt issuance costs(1)
(18
)
 
(18
)
Current installments of long-term debt
(58
)
 
(56
)
Total
2,487

 
2,468

______________________________
(1) 
Related to the Company's long-term debt, excluding obligations under capital leases.
Senior Notes
The Company has outstanding senior unsecured notes issued in public offerings registered under the Securities Act of 1933, as amended, as follows (collectively, the "Senior Notes"):
Senior Notes
 
Issue Date
 
Principal
 
Interest Rate
 
Interest Pay Dates
 
Maturity Date
 
 
 
 
(In millions)
 
(In percentages)
 
 
 
 
 
 
3.250% Notes
 
September 2014
 
€300
 
3.250
 
April 15
 
October 15
 
October 15, 2019
4.625% Notes
 
November 2012
 
$500
 
4.625
 
March 15
 
September 15
 
November 15, 2022
5.875% Notes
 
May 2011
 
$400
 
5.875
 
June 15
 
December 15
 
June 15, 2021
The Senior Notes are senior unsecured obligations of Celanese US and rank equally in right of payment with all other unsubordinated indebtedness of Celanese US. The Senior Notes were issued under indentures (collectively, "Indentures") among Celanese US, Celanese and each of the domestic subsidiaries of Celanese US that guarantee its obligations under its senior secured credit facilities ("Subsidiary Guarantors") and Wells Fargo Bank, National Association, as trustee. The Senior Notes are guaranteed on a senior unsecured basis by Celanese and the Subsidiary Guarantors. The Indentures contain covenants, including, but not limited to, restrictions on the Company's ability to incur indebtedness; grant liens on assets; merge, consolidate, or sell assets; pay dividends or make other restricted payments; engage in transactions with affiliates; or engage in other businesses. Celanese US may redeem some or all of each of the Senior Notes, prior to their respective maturity dates, at a redemption price of 100% of the principal amount, plus a "make-whole" premium as specified in the applicable indenture, plus accrued and unpaid interest, if any, to the redemption date.
Senior Credit Facilities
In September 2014, Celanese US, Celanese and the Subsidiary Guarantors entered into an amendment agreement with the lenders under Celanese US's existing senior secured credit facilities in order to amend and restate the amended credit agreement dated September 16, 2013 (as amended and restated by the 2014 amendment agreement, the "Amended Credit Agreement"). Under the Amended Credit Agreement, all of the US dollar-denominated Term C-2 term loans and all but €28 million of the Euro-denominated Term C-2 term loans under the 2013 amended credit agreement were converted into, or refinanced by, the Term C-3 loan facility with an extended maturity date of October 2018. The non-extended portions of the Term C-2 loan facility continue to have a maturity date of October 2016. In addition, the maturity date of the Company's revolving credit facility was extended to October 2018 and the facility was increased to $900 million. Accordingly, the Amended Credit Agreement consists of the Term C-2 loan facility, the Term C-3 loan facility and a $900 million revolving credit facility.

14



As of March 31, 2016, the margin for borrowings under the Term C-2 loan facility was 2.0% above the Euro Interbank Offered Rate ("EURIBOR") and the margin for borrowings under the Term C-3 loan facility was 2.25% above LIBOR (for US dollars) and 2.25% above EURIBOR (for Euros), as applicable. As of March 31, 2016, the margin for borrowings under the revolving credit facility was 1.5% above LIBOR. The margin for borrowings under the revolving credit facility is subject to increase or decrease in certain circumstances based on changes in the corporate credit ratings of Celanese or Celanese US.
Term loan borrowings under the Amended Credit Agreement are subject to amortization at 1% of the initial principal amount per annum, payable quarterly. In addition, the Company pays quarterly commitment fees on the unused portions of the revolving credit facility of 0.25% per annum.
The Amended Credit Agreement is guaranteed by Celanese and certain domestic subsidiaries of Celanese US and is secured by a lien on substantially all assets of Celanese US and such guarantors, subject to certain agreed exceptions (including for certain real property and certain shares of foreign subsidiaries), pursuant to the Guarantee and Collateral Agreement dated April 2, 2007.
As a condition to borrowing funds or requesting letters of credit be issued under the revolving credit 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 the threshold as specified below. 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 Company's amended first lien senior secured leverage ratios under the revolving credit facility are as follows:
As of March 31, 2016
Maximum
 
Estimate
 
Estimate, If Fully Drawn
3.90
 
0.67
 
1.30
The Amended Credit Agreement contains covenants including, but not limited to, restrictions on the Company's 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; as well as a covenant requiring maintenance of a maximum first lien senior secured leverage ratio.
The Amended Credit Agreement also maintains a number of events of default, including a cross default to other debt of Celanese, Celanese US, or their subsidiaries, including the Senior Notes, in an aggregate amount equal to more than $50 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 borrowings and other financial obligations under the Amended Credit Agreement.
Pollution Control and Industrial Revenue Bonds
On March 3, 2016, the State of Wisconsin Public Finance Authority ("PFA") completed an offering of exempt facilities refunding revenue bonds ("Bonds"), the proceeds of which were loaned to Celanese US and used to repay the pollution control and industrial revenue bonds previously issued for the benefit of the Company. The Bonds were issued under an indenture between the PFA and Wells Fargo Bank, National Association, as trustee. Payment of the principal, redemption premium, if any, and interest on the Bonds is unconditionally guaranteed by Celanese and certain of its subsidiaries. The loan agreement in the amount of $170 million between the PFA and Celanese US contains covenants substantially similar to those applicable to the Senior Notes. In connection with the refinancing, the Company recorded deferred financing costs of $2 million during the three months ended March 31, 2016, which are being amortized over the terms of the Bonds. The Company accelerated amortization of deferred financing costs and other refinancing expenses of $2 million related to the refinancing, which are included in Refinancing expense in the unaudited interim consolidated statements of operations.
The Company is in compliance with all of the covenants related to its debt agreements as of March 31, 2016.

15



Accounts Receivable Securitization Facility
In August 2013, the Company entered into a US accounts receivable securitization facility pursuant to (i) a Purchase and Sale Agreement ("Sale Agreement") among certain US subsidiaries of the Company (each an "Originator"), Celanese International Corporation ("CIC") and CE Receivables LLC, a wholly-owned, "bankruptcy remote" special purpose subsidiary of an Originator ("Transferor") and (ii) a Receivables Purchase Agreement ("Purchase Agreement"), among CIC, as servicer, the Transferor, various third-party purchasers (collectively, "Purchasers") and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as administrator ("Administrator"). The Purchase Agreement expires in 2016, but may be extended for successive one year terms by agreement of the parties. All of the Transferor's assets have been pledged to the Administrator in support of its obligations under the Purchase Agreement.
The Company's balances available for borrowing are as follows:
 
As of
March 31,
2016
 
 
(In $ millions)
 
Revolving Credit Facility
 
 
Borrowings outstanding

(1) 
Letters of credit issued

 
Available for borrowing
900

 
Accounts Receivable Securitization Facility
 
 
Borrowings outstanding

(2) 
Letters of credit issued
52

 
Available for borrowing
61

 
Total borrowing base
113

 
 
 
 
Maximum borrowing base
120

(3) 
______________________________
(1) 
The Company borrowed $245 million and repaid $595 million during the three months ended March 31, 2016.
(2) 
The Company repaid $55 million during the three months ended March 31, 2016.
(3) 
Outstanding accounts receivable transferred by the Originators to the Transferor was $136 million.
9. Benefit Obligations
Beginning in 2016, the Company elected to use a full yield curve approach in the estimation of the service and interest cost components of net periodic benefit cost by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows (Note 1). The Company's adoption of the full yield curve approach will reduce 2016 service and interest cost by approximately $29 million as compared to the previous method.
The components of net periodic benefit cost are as follows:
 
Three Months Ended March 31,
 
2016
 
2015
 
Pension
Benefits
 
Post-retirement
Benefits
 
Pension
Benefits
 
Post-retirement
Benefits
 
(In $ millions)
Service cost
2

 

 
3

 

Interest cost
28

 
1

 
35

 
1

Expected return on plan assets
(44
)
 

 
(52
)
 

Amortization of prior service cost (credit), net

 
(1
)
 

 

Special termination benefit
1

 

 
1

 

Total
(13
)
 

 
(13
)
 
1


16



Benefit obligation funding is as follows:
 
As of
March 31,
2016
 
Total
Expected
2016
 
(In $ millions)
Cash contributions to defined benefit pension plans
7

 
23

Benefit payments to nonqualified pension plans
6

 
22

Benefit payments to other postretirement benefit plans
1

 
4

Cash contributions to German multiemployer defined benefit pension plans(1)
2

 
8

______________________________
(1) 
The Company makes contributions based on specified percentages of employee contributions.
The Company's estimates of its US defined benefit pension plan contributions reflect the provisions of the Pension Protection Act of 2006.
10. Environmental
The Company is subject to environmental laws and regulations worldwide that 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 the divestiture of certain businesses by the Company or one of its predecessor companies.
The components of environmental remediation reserves are as follows:
 
As of
March 31,
2016
 
As of
December 31,
2015
 
(In $ millions)
Demerger obligations (Note 16)
20

 
22

Divestiture obligations (Note 16)
17

 
17

Active sites
18

 
18

US Superfund sites
13

 
13

Other environmental remediation reserves
3

 
2

Total
71

 
72

Remediation
Due to its industrial history and through retained contractual and legal obligations, the Company has the obligation to remediate specific areas on its own sites as well as on divested, demerger, orphan or US Superfund sites (as defined below). In addition, as part of the demerger agreement between the Company and Hoechst AG ("Hoechst"), a specified portion of the responsibility for environmental liabilities from a number of Hoechst divestitures was transferred to the Company (Note 16). The Company provides for such obligations when the event of loss is probable and reasonably estimable. The Company believes that environmental remediation costs will not have a material adverse effect on the financial position of the Company, but may have a material adverse effect on the results of operations or cash flows in any given period.
US Superfund Sites
In the US, the Company may be subject to substantial claims brought by US federal or state regulatory agencies or private individuals pursuant to statutory authority or common law. In particular, the Company has a potential liability under the US Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and related state laws (collectively referred to as "Superfund") for investigation and cleanup costs at certain sites. At most of these sites, numerous companies, including the Company, or one of its predecessor companies, have been notified that the US Environmental Protection Agency ("EPA"), state governing bodies or private individuals consider such companies to be potentially responsible parties ("PRP") under Superfund or related laws. The proceedings relating to these sites are in various stages. The cleanup process has not been completed at most sites, and the status of the insurance coverage for some of these proceedings is

17



uncertain. Consequently, the Company cannot accurately determine its ultimate liability for investigation or cleanup costs at these sites.
As events progress at each site for which it has been named a PRP, the Company accrues, as appropriate, a liability for site cleanup. Such liabilities include all costs that are probable and can be reasonably estimated. In establishing these liabilities, the Company considers its shipment of waste to a site, its percentage of total waste shipped to the site, the types of wastes involved, the conclusions of any studies, the magnitude of any remedial actions that may be necessary and the number and viability of other PRPs. Often the Company joins with other PRPs to sign joint defense agreements that settle, among PRPs, each party's percentage allocation of costs at the site. Although the ultimate liability may differ from the estimate, the Company routinely reviews the liabilities and revises the estimate, as appropriate, based on the most current information available.
One such site is the Lower Passaic River Study Area, which is the lower 17-mile stretch of the Passaic River ("Site"). The Company and 70 other companies are parties to a May 2007 Administrative Order on Consent with the EPA to perform a Remedial Investigation/Feasibility Study ("RI/FS") at the Site in order to identify the levels of contaminants and potential cleanup actions. Work on the RI/FS is ongoing, with a goal to complete it in 2017.
On March 3, 2016, the EPA issued its final record of decision concerning the remediation of the lower 8.3 miles of the Site ("Lower 8.3 Miles"). The Company owned and/or operated facilities in the vicinity of the Lower 8.3 Miles, but has found no evidence that it contributed any of the primary contaminants of concern to the Passaic River. Pursuant to the decision, the Lower 8.3 Miles must be dredged bank to bank and an engineered cap must be installed at an estimated cost of approximately $1.4 billion. The Company is vigorously defending this matter and currently believes that its ultimate allocable share of the cleanup costs, estimated at less than 1%, will not be material.
11. Stockholders' Equity
Common Stock
The Company's Board of Directors follows a policy of declaring, subject to legally available funds, a quarterly cash dividend on each share of the Company's Series A common stock, par value $0.0001 per share ("Common Stock"), unless the Company's Board of Directors, in its sole discretion, determines otherwise. The amount available to pay cash dividends is restricted by the Company's Amended Credit Agreement and the Indentures.
The Company's Board of Directors approved increases in the Company's Common Stock cash dividend rates as follows:
 
Increase
 
Quarterly Common
Stock Cash Dividend
 
Annual Common
Stock Cash Dividend
 
Effective Date
 
(In percentages)
 
(In $ per share)
 
 
April 2015
20
 
0.30
 
1.20
 
May 2015
Treasury Stock
 
Three Months Ended
March 31,
 
Total From
February 2008
Through
March 31, 2016
 
2016
 
2015
 
Shares repurchased

 

 
27,307,796

Average purchase price per share
$

 
$

 
$
48.90

Cash paid for repurchased shares (in millions)
$

 
$

 
$
1,335

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

 
$

 
$
2,366

______________________________
(1) 
These authorizations give management discretion in determining the timing and conditions under which shares may be repurchased. This repurchase program began in February 2008 and does not have an expiration date.
The purchase of treasury stock reduces the number of shares outstanding. The repurchased shares may be used by the Company for compensation programs utilizing the Company's stock and other corporate purposes. The Company accounts for treasury stock using the cost method and includes treasury stock as a component of stockholders' equity.

18



Other Comprehensive Income (Loss), Net
 
Three Months Ended March 31,
 
2016
 
2015
 
Gross
Amount
 
Income
Tax
(Provision)
Benefit
 
Net
Amount
 
Gross
Amount
 
Income
Tax
(Provision)
Benefit
 
Net
Amount
 
(In $ millions)
Unrealized gain (loss) on marketable securities
1

 

 
1

 

 

 

Foreign currency translation
70

 
(6
)
 
64

 
(150
)
 
(6
)
 
(156
)
Gain (loss) on cash flow hedges

 

 

 
3

 
(1
)
 
2

Pension and postretirement benefits

 

 

 

 
(3
)
 
(3
)
Total
71

 
(6
)
 
65

 
(147
)
 
(10
)
 
(157
)
Adjustments to Accumulated other comprehensive income (loss), net, are as follows:
 
Unrealized
Gain (Loss)
on
Marketable
Securities
 
Foreign
Currency
Translation
 
Gain (Loss)
on Cash
Flow
Hedges
 
Pension
and
Postretirement
Benefits
 
Accumulated
Other
Comprehensive
Income
(Loss), Net
 
(In $ millions)
As of December 31, 2015
1

 
(339
)
 
(2
)
 
(8
)
 
(348
)
Other comprehensive income (loss) before reclassifications
1

 
70

 

 
(1
)
 
70

Amounts reclassified from accumulated other comprehensive income (loss)

 

 


1


1

Income tax (provision) benefit

 
(6
)
 

 

 
(6
)
As of March 31, 2016
2

 
(275
)
 
(2
)
 
(8
)
 
(283
)
12. Other (Charges) Gains, Net
 
Three Months Ended March 31,
 
2016
 
2015
 
(In $ millions)
Employee termination benefits
(5
)
(1) 
(4
)
Commercial disputes

 
(1
)
Total
(5
)
 
(5
)
______________________________
(1) 
Includes $1 million of special termination benefits included in Benefit obligations in the unaudited consolidated balance sheets and is included in the Company's Other Activities segment.
During the three months ended March 31, 2016 and 2015, the Company recorded $5 million and $4 million, respectively, of employee termination benefits primarily related to the Company's ongoing efforts to align its businesses around its core value drivers. During the three months ended March 31, 2015, the Company also recorded $1 million of damages in connection with the settlement of a claim by a raw materials supplier. The commercial dispute resolution is included in the Acetyl Intermediates segment.

19



The changes in the restructuring reserves by business segment are as follows:
 
Advanced
Engineered
Materials
 
Consumer
Specialties
 
Industrial
Specialties
 
Acetyl
Intermediates
 
Other
 
Total
 
(In $ millions)
Employee Termination Benefits
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2015
3

 
14

 
6

 
1

 
6

 
30

Additions
1

 

 
1

 

 
2

 
4

Cash payments
(2
)
 
(2
)
 
(4
)
 

 
(1
)
 
(9
)
Other changes

 

 

 

 

 

Exchange rate changes

 
1

 

 

 

 
1

As of March 31, 2016
2

 
13

 
3

 
1

 
7

 
26

Other Plant/Office Closures
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2015

 

 

 

 

 

Additions

 

 

 

 

 

Cash payments

 

 

 

 

 

Other changes

 

 

 

 

 

Exchange rate changes

 

 

 

 

 

As of March 31, 2016

 

 

 

 

 

Total
2

 
13

 
3

 
1

 
7

 
26

13. Income Taxes
 
Three Months Ended
March 31,
 
2016
 
2015
 
(In percentages)
Effective income tax rate
19
 
24
In 2015, the Company established a centralized European headquarters for the purpose of improving the operational efficiencies and profitability of its European operations and certain global product lines. These activities have a direct impact on the Company's mix of earnings and product flows and will result in both favorable and unfavorable tax impacts in the jurisdictions in which the Company operates.
The lower effective income tax rate for the three months ended March 31, 2016 is primarily due to decreases in losses that provide no tax benefit and favorable changes in the mix of jurisdictional earnings partially attributable to the implementation of the Company's centralized European headquarters.
For the three months ended March 31, 2016, the Company's uncertain tax positions increased $11 million, primarily due to exchange rate fluctuations.
The Company's US tax returns for the years 2009 through 2012 are currently under audit by the US Internal Revenue Service and certain of the Company's subsidiaries are under audit in jurisdictions outside of the US. The Company does not expect any material changes in the unrecognized tax benefits within the next twelve months related to the settlement of one or more of these audits or lapse of applicable statutes of limitations.
14. Derivative Financial Instruments
Interest Rate Swaps
During 2014, the Company fixed the LIBOR portion of its US dollar denominated variable rate borrowings (Note 8) with interest rate swap derivative arrangements. The interest rate swaps with a notional value of $500 million expired on January 2, 2016.

20



Foreign Currency Forwards and Swaps
Gross notional values of the foreign currency forwards and swaps are as follows:
 
As of
March 31,
2016
 
As of
December 31,
2015
 
(In $ millions)
Total
457

 
502

Cross-currency Swaps
In March 2015, the Company settled its cross-currency swap agreements with notional values of $250 million/€193 million, expiring September 11, 2020, and $225 million/€162 million, expiring April 17, 2019, in exchange for cash of $88 million. The Company recorded a net loss of $1 million, which is included in Other income (expense), net in the unaudited interim consolidated statement of operations. The Company classifies cash flows from derivative instruments designated as cash flow hedges in the same category of the consolidated statement of cash flows as the cash flows from the items being hedged. Accordingly, the settlement of the cross-currency swap agreements is included in Net cash provided by (used in) operating activities in the unaudited interim consolidated statement of cash flows for the three months ended March 31, 2015.
Information regarding changes in the fair value of the Company's derivative and non-derivative instruments is as follows:
 
Gain (Loss) Recognized in Other Comprehensive Income (Loss)
 
Gain (Loss) Recognized in Earnings (Loss)
 
 
 
Three Months Ended March 31,
 
Statement of Operations Classification
 
2016
 
2015
 
2016
 
2015
 
 
(In $ millions)
 
 
Designated as Cash Flow Hedges
 
 
 
 
 
 
 
 
 
Cross-currency swaps

 

 

 
46

 
Other income (expense), net; Interest expense
Total

 

 

 
46

 
 
 
 
 
 
 
 
 
 
 
 
Designated as Net Investment Hedges
 
 
 
 
 
 
 
 
 
3.250% Notes(1)
(5
)
 
41

 

 

 
Foreign currency translation
Term C-2 and Term C-3 loans(2)
(1
)
 
8

 

 

 
Foreign currency translation
Total
(6
)
 
49

 

 

 
 
 
 
 
 
 
 
 
 
 
 
Not Designated as Hedges
 
 
 
 
 
 
 
 
 
Foreign currency forwards and swaps

 

 
7

 
(68
)
 
Foreign exchange gain (loss), net; Other income (expense), net
Total

 

 
7

 
(68
)
 
 
______________________________
(1) 
During the three months ended March 31, 2016, the Company dedesignated €260 million of its 3.250% Notes as a net investment hedge.
(2) 
During the three months ended December 31, 2015, the Company dedesignated the Euro-based principal amount of its Term C-3 loan as a net investment hedge.
See Note 15 - Fair Value Measurements for further information regarding the fair value of the Company's derivative instruments.
Certain of the Company's foreign currency forwards and swaps permit the Company to net settle all contracts with the counterparty through a single payment in an agreed upon currency in the event of default or early termination of the contract, similar to a master netting arrangement.

21



Information regarding the gross amounts of the Company's derivative instruments and the amounts offset in the unaudited consolidated balance sheets is as follows:
 
As of
March 31,
2016
 
As of
December 31,
2015
 
(In $ millions)
Derivative Assets
 
 
 
Gross amount recognized
4

 
2

Gross amount offset in the consolidated balance sheets

 

Net amount presented in the consolidated balance sheets
4

 
2

Gross amount not offset in the consolidated balance sheets
2

 

Net amount
2

 
2

 
As of
March 31,
2016
 
As of
December 31,
2015
 
(In $ millions)
Derivative Liabilities
 
 
 
Gross amount recognized
3

 
2

Gross amount offset in the consolidated balance sheets

 

Net amount presented in the consolidated balance sheets
3

 
2

Gross amount not offset in the consolidated balance sheets
2

 

Net amount
1

 
2

15. Fair Value Measurements
The Company's financial assets and liabilities are measured at fair value on a recurring basis as follows:
Derivatives. Derivative financial instruments, including interest rate swaps, cross-currency swaps and foreign currency forwards and swaps, are valued in the market using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 fair value measurement inputs such as 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, cross-currency swaps and foreign currency forwards and swaps are observable in the active markets and are classified as Level 2 in the fair value measurement hierarchy.

22



 
Fair Value Measurement
 
 
 
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Total
 
Balance Sheet Classification
 
(In $ millions)
 
 
As of March 31, 2016
 
 
 
 
 
 
 
Derivatives Not Designated as Hedges
 
 
 
 


 
 
Foreign currency forwards and swaps

 
4

 
4

 
Current Other assets
Total assets

 
4

 
4

 
 
Designated as Net Investment Hedges
 
 
 
 
 
 
 
3.250% Notes(1)

 

 

 
Long-term Debt
Term C-2 loans(1)

 

 

 
Long-term Debt
Derivatives Not Designated as Hedges
 
 
 
 
 
 
 
Foreign currency forwards and swaps

 
(3
)
 
(3
)
 
Current Other liabilities
Total liabilities

 
(3
)
 
(3
)
 
 
As of December 31, 2015
 
 
 
 
 
 
 
Derivatives Not Designated as Hedges
 
 
 
 
 
 
 
Foreign currency forwards and swaps

 
2

 
2

 
Current Other assets
Total assets

 
2

 
2

 
 
Designated as a Net Investment Hedge
 
 
 
 
 
 
 
3.250% Notes(1)

 

 

 
Long-term Debt
Term C-2 loans(1)

 

 

 
Long-term Debt
Derivatives Not Designated as Hedges
 
 
 
 
 
 
 
Foreign currency forwards and swaps

 
(2
)
 
(2
)
 
Current Other liabilities
Total liabilities

 
(2
)
 
(2
)
 
 
______________________________
(1) 
Included in the unaudited consolidated balance sheets at carrying amount.
Carrying values and fair values of financial instruments that are not carried at fair value are as follows:
 
 
 
Fair Value Measurement
 
Carrying
Amount
 
Significant Other
Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
 
Total
 
(In $ millions)
As of March 31, 2016
 
 
 
 
 
 
 
Cost investments
151

 

 

 

Insurance contracts in nonqualified trusts
55

 
55

 

 
55

Long-term debt, including current installments of long-term debt
2,563

 
2,397

 
237

 
2,634

As of December 31, 2015
 
 
 
 
 
 
 
Cost investments
151

 

 

 

Insurance contracts in nonqualified trusts
55

 
55

 

 
55

Long-term debt, including current installments of long-term debt
2,542

 
2,348

 
238

 
2,586

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. Insurance contracts in nonqualified trusts consist of long-term fixed income securities, which are valued using independent vendor pricing

23



models with observable inputs in the active market and therefore represent a Level 2 fair value measurement. The fair value of long-term debt is based on valuations from third-party banks and market quotations and is classified as Level 2 in the fair value measurement hierarchy. The fair value of obligations under capital leases, which are included in long-term debt, is based on lease payments and discount rates, which are not observable in the market and therefore represents a Level 3 fair value measurement.
As of March 31, 2016 and December 31, 2015, the fair values of cash and cash equivalents, receivables, trade payables, short-term borrowings 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 with the exception of the current installments of long-term debt.
16. Commitments and Contingencies
Commitments
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. The Company has accrued for all probable and reasonably estimable losses associated with all known matters or claims. These known obligations include the following:
Demerger Obligations
In connection with the Hoechst demerger, the Company agreed to indemnify Hoechst, and its legal successors, for various liabilities under the demerger agreement, including for environmental liabilities associated with contamination arising either from environmental damage in general ("Category A") or under 19 divestiture agreements entered into by Hoechst prior to the demerger ("Category B") (Note 10).
The Company's obligation to indemnify Hoechst, and its legal successors, is capped under Category B at €250 million. If and to the extent the environmental damage should exceed €750 million in aggregate, the Company's obligation to indemnify Hoechst and its legal successors applies, but is then limited to 33.33% of the remediation cost without further limitations. Cumulative payments under the divestiture agreements as of March 31, 2016 are $72 million. Most of the divestiture agreements have become time barred and/or any notified environmental damage claims have been partially settled.
The Company has also undertaken in the demerger agreement to indemnify Hoechst and its legal successors for (i) 33.33% of any and all Category A liabilities that result from Hoechst being held as the responsible party pursuant to public law or current or future environmental law or by third parties pursuant to private or public law related to contamination and (ii) 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 been requested by Hoechst to make any payments in connection with this indemnification. Accordingly, the Company has not made any payments to Hoechst and its legal successors.
Based on the Company's evaluation of currently available information, including the lack of requests for indemnification, the Company cannot estimate the Possible Loss for the remaining demerger obligations, if any, in excess of amounts accrued.
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 (Note 10).
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, which extend through 2037. The aggregate amount of outstanding indemnifications and guarantees provided for under these agreements is $202 million as of March 31, 2016. Other agreements do not provide for any monetary or time limitations.

24



Based on the Company's evaluation of currently available information, including the number of requests for indemnification or other payment received by the Company, the Company cannot estimate the Possible Loss for the remaining divestiture obligations, if any, in excess of amounts accrued.
Purchase Obligations
In the normal course of business, the Company enters into various purchase commitments for goods and services. The Company maintains a number of "take-or-pay" contracts for purchases of raw materials, utilities and other services. Certain of the contracts contain a contract termination buy-out provision that allows for the Company to exit the contracts for amounts less than the remaining take-or-pay obligations. The Company does not expect to incur any material losses under take-or-pay contractual arrangements. Additionally, the Company has other outstanding commitments representing maintenance and service agreements, energy and utility agreements, consulting contracts and software agreements. As of March 31, 2016, the Company had unconditional purchase obligations of $2.9 billion, which extend through 2036.
Contingencies
The Company is involved in legal and regulatory proceedings, lawsuits, claims and investigations incidental to the normal conduct of business, relating to such matters as product liability, land disputes, commercial contracts, employment, antitrust, intellectual property, workers' compensation, chemical exposure, asbestos exposure, taxes, trade compliance, prior acquisitions and divestitures, claims of legacy stockholders, past waste disposal practices and release of chemicals into the environment. The Company is actively defending those matters where the Company is named as a defendant and, based on the current facts, does not believe any outcomes from these matters would be material to our results of operations, cash flows or financial position.
17. Segment Information
 
Advanced
Engineered
Materials
 
Consumer
Specialties
 
Industrial
Specialties
 
Acetyl
Intermediates
 
Other
Activities
 
Eliminations
 
Consolidated
 
 
(In $ millions)
 
 
Three Months Ended March 31, 2016
 
Net sales
350

 
244

 
253

 
663

(1) 

 
(106
)
 
1,404

 
Other (charges) gains, net
(1
)
 

 
(1
)
 

 
(3
)
 

 
(5
)
 
Operating profit (loss)
88

 
78

 
31

 
114

 
(24
)
 

 
287

 
Equity in net earnings (loss) of affiliates
31

 
1



 
1

 
5

 

 
38

 
Depreciation and amortization
24

 
11

 
8

 
27

 
3

 

 
73

 
Capital expenditures
19

 
9


18

 
9


3

 

 
58

(2) 
 
As of March 31, 2016
 
Goodwill and intangible assets, net
344

 
253

 
49

 
201

 

 

 
847

 
Total assets
2,445

 
1,471

 
758

 
2,360

 
1,358

 

 
8,392

 
 
Three Months Ended March 31, 2015
 
Net sales
343

 
227


282

 
713

(1) 

 
(115
)
 
1,450

 
Other (charges) gains, net
(1
)
 

 
(1
)
 
(1
)
 
(2
)
 

 
(5
)
 
Operating profit (loss)
59

 
62

 
29

 
131

 
(24
)
 

 
257

 
Equity in net earnings (loss) of affiliates
43

 

 

 
1

 
4

 

 
48

 
Depreciation and amortization
25

 
11

 
10

 
19

 
2

 

 
67

 
Capital expenditures
17

 
26


6

 
96


1

 

 
146

(2) 
 
As of December 31, 2015
 
Goodwill and intangible assets, net
338

 
249

 
49

 
194

 

 

 
830

 
Total assets
2,324

 
1,458

 
747

 
2,387

 
1,670

 

 
8,586

 
______________________________
(1) 
Net sales for Acetyl Intermediates includes intersegment sales of $106 million and $115 million for the three months ended March 31, 2016 and 2015, respectively.
(2) 
Includes a decrease in accrued capital expenditures of $12 million and $16 million for the three months ended March 31, 2016 and 2015, respectively.

25



18. Earnings (Loss) Per Share
 
Three Months Ended
March 31,
 
2016
 
2015
 
(In $ millions, except share data)
Amounts attributable to Celanese Corporation
 
 
 
Earnings (loss) from continuing operations
256

 
236

Earnings (loss) from discontinued operations
1

 

Net earnings (loss)
257

 
236

 
 
 
 
Weighted average shares - basic
147,413,234

 
153,216,510

Incremental shares attributable to equity awards
717,880

 
685,052

Weighted average shares - diluted
148,131,114

 
153,901,562

During the three months ended March 31, 2016 and 2015, there were no anti-dilutive equity awards excluded from the computation of diluted net earnings per share.
19. Consolidating Guarantor Financial Information
The Senior Notes were issued by Celanese US ("Issuer") and are guaranteed by Celanese Corporation ("Parent Guarantor") and the Subsidiary Guarantors (Note 8). The Issuer and Subsidiary Guarantors are 100% owned subsidiaries of the Parent Guarantor. The Parent Guarantor and Subsidiary Guarantors have guaranteed the Notes fully and unconditionally and jointly and severally.
For cash management purposes, the Company transfers cash between the Parent Guarantor, Issuer, Subsidiary Guarantors and non-guarantors through intercompany financing arrangements, contributions or declaration of dividends between the respective parent and its subsidiaries. The transfer of cash under these activities facilitates the ability of the recipient to make specified third-party payments for principal and interest on the Company's outstanding debt, Common Stock dividends and Common Stock repurchases. The unaudited interim consolidating statements of cash flows for the three months ended March 31, 2016 and 2015 present such intercompany financing activities, contributions and dividends consistent with how such activity would be presented in a stand-alone statement of cash flows.
The Company has not presented separate financial information and other disclosures for each of its Subsidiary Guarantors because it believes such financial information and other disclosures would not provide investors with any additional information that would be material in evaluating the sufficiency of the guarantees.
The unaudited interim consolidating financial statements for the Parent Guarantor, the Issuer, the Subsidiary Guarantors and the non-guarantors are as follows:

26



CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATING STATEMENT OF OPERATIONS
 
Three Months Ended March 31, 2016
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
Net sales

 

 
583

 
1,139

 
(318
)
 
1,404

Cost of sales

 

 
(441
)
 
(891
)
 
318

 
(1,014
)
Gross profit

 

 
142

 
248

 

 
390

Selling, general and administrative expenses

 

 
(17
)
 
(63
)
 

 
(80
)
Amortization of intangible assets

 

 
(1
)
 
(1
)
 

 
(2
)
Research and development expenses

 

 
(8
)
 
(11
)
 

 
(19
)
Other (charges) gains, net

 

 

 
(5
)
 

 
(5
)
Foreign exchange gain (loss), net

 

 

 
3

 

 
3

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

 

 
(1
)
 
1

 

 

Operating profit (loss)

 

 
115

 
172

 

 
287

Equity in net earnings (loss) of affiliates
256

 
274

 
173

 
37

 
(702
)
 
38

Interest expense

 
(15
)
 
(15
)
 
(8
)
 
5

 
(33
)
Refinancing expense