Celanese Corp: Form 10-Q for the period ended Sep 30, 2023

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 terms the "Company," "we," "our" and "us," refer to Celanese and its subsidiaries on a consolidated basis. The term "Celanese U.S." refers to the Company's subsidiary, Celanese US Holdings LLC, a Delaware limited liability company, and not its subsidiaries.

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, 2022 filed on February 24, 2023 with the Securities and Exchange Commission ("SEC") as part of the Company's Annual Report on Form 10-K ("2022 Form 10-K") and the unaudited interim consolidated financial statements and notes to the unaudited interim consolidated financial statements herein, which are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").

Investors are cautioned that the forward-looking statements contained in this section and other parts of this Quarterly Report involve both risk and uncertainty. Several important factors could cause actual results to differ materially from those anticipated by these statements. Many of these statements are macroeconomic in nature and are, therefore, beyond the control of management. See "Forward-Looking Statements" below and at the beginning of our 2022 Form 10-K.

Forward-Looking Statements

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") and other parts of this Quarterly Report contain certain forward-looking statements and information relating to us that are based on the beliefs of our management as well as assumptions made by, and information currently available to, us. Generally, words such as "believe," "expect," "intend," "estimate," "anticipate," "project," "plan," "may," "can," "could," "might," and "will," and similar expressions, as they relate to us are intended to identify forward-looking statements. These statements reflect our current views and beliefs with respect to future events at the time that the statements are made, are not historical facts or guarantees of future performance and involve risks and uncertainties that are difficult to predict and many of which are outside of our control. Further, certain forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. All forward-looking statements made in this Quarterly Report are made as of the date hereof, and the risk that actual results will differ materially from expectations expressed in this Quarterly Report will increase with the passage of time. We undertake no obligation, and disclaim any duty, to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changes in our expectations or otherwise.

Risk Factors

See Part I - Item 1A. Risk Factors of our 2022 Form 10-K for a description of certain risk factors that you should consider which could significantly affect our financial results. In addition, the following factors, among others, 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:

• changes in general economic, business, political and regulatory conditions in the countries or regions in which we operate;
• volatility or changes in the price and availability of raw materials and energy, particularly changes in the demand for, supply of, and market prices of ethylene, methanol, natural gas, wood pulp and fuel oil and the prices for electricity and other energy sources;
• the length and depth of product and industry business cycles particularly in the automotive, electrical, textiles, electronics and construction industries;
• the ability to pass increases in raw material prices, logistics costs and other costs on to customers or otherwise improve margins through price increases;
• the accuracy or inaccuracy of our beliefs or assumptions regarding anticipated benefits of the acquisition (the "M&M Acquisition") by us of the majority of the Mobility & Materials business (the "M&M Business") of DuPont de Nemours, Inc. ("DuPont");
• the possibility that we will not be able to realize all of the anticipated improvements in the M&M Business's financial performance – including optimizing pricing, currency mix and inventory – or realize all of the anticipated benefits of the M&M Acquisition, including synergies and growth opportunities, within the anticipated timeframe or at all, whether as a

result of difficulties arising from the operation or integration of the M&M Business or other unanticipated delays, costs, inefficiencies or liabilities;

• increased commercial, legal or regulatory complexity of entering into, or expanding our exposure to, certain end markets and geographies;
• risks in the global economy and equity and credit markets and their potential impact on our ability to pay down debt in the future and/or refinance at suitable rates, in a timely manner, or at all;
• diversion of management's attention from ongoing business operations and opportunities and other disruption caused by the M&M Acquisition and the integration processes and their impact on our existing business and relationships;
• risks and costs associated with increased leverage from the M&M Acquisition, including increased interest expense and potential reduction of business and strategic flexibility;
• the ability to maintain plant utilization rates and to implement planned capacity additions, expansions and maintenance;
• the ability to reduce or maintain current levels of production costs and to improve productivity by implementing technological improvements to existing plants;
• increased price competition and the introduction of competing products by other companies;
• the ability to identify desirable potential acquisition or divestiture opportunities and to complete such transactions, including obtaining regulatory approvals, consistent with our strategy;
• market acceptance of our products and technology;
• compliance and other costs and potential disruption or interruption of production or operations due to accidents, interruptions in sources of raw materials, transportation, logistics or supply chain disruptions, cybersecurity incidents, terrorism or political unrest, public health crises (including, but not limited to, the COVID-19 pandemic), or other unforeseen events or delays in construction or operation of facilities, including as a result of geopolitical conditions, the occurrence of acts of war (such as the Russia-Ukraine conflict) or terrorist incidents or as a result of weather, natural disasters, or other crises;
• the ability to obtain governmental approvals and to construct facilities on terms and schedules acceptable to us;
• changes in applicable tariffs, duties and trade agreements, tax rates or legislation throughout the world including, but not limited to, adjustments, changes in estimates or interpretations or the resolution of tax examinations or audits that may impact recorded or future tax impacts and potential regulatory and legislative tax developments in the United States and other jurisdictions;
• changes in the degree of intellectual property and other legal protection afforded to our products or technologies, or the theft of such intellectual property;
• potential liability for remedial actions and increased costs under existing or future environmental, health and safety regulations, including those relating to climate change or other sustainability matters;
• potential liability resulting from pending or future claims or litigation, including investigations or enforcement actions, 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.

Many of these factors are macroeconomic in nature and are, therefore, beyond our control. Should one or more of these risks or uncertainties materialize, affect us in ways or to an extent that we currently do not expect or consider to be significant, 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 global chemical and specialty materials company. We are a leading global producer of high performance engineered polymers that are used in a variety of high-value applications, as well as one of the world's largest producers of acetyl products, which are intermediate chemicals, for nearly all major industries. As a recognized innovator in the chemicals industry, we engineer and manufacture a wide variety of products essential to everyday living. Our broad product portfolio serves a diverse set of end-use applications including automotive, chemical additives, construction, consumer and industrial adhesives, medical, consumer electronics, energy storage, filtration, paints and coatings, paper and packaging, performance industrial and textiles. Our products enjoy leading global positions due to our differentiated business models, large global production capacity, operating efficiencies, proprietary technology and competitive cost structures.

Our large and diverse global customer base primarily consists of major companies across a broad array of industries. We hold geographically balanced global positions and participate in diversified end-use applications. We combine a demonstrated track record of execution, strong performance built on differentiated business models and a clear focus on growth and value creation. Known for operational excellence, reliability and execution of our business strategies, we partner with our customers around the globe to deliver best-in-class technologies and solutions.

On September 27, 2023, we formed a food ingredients joint venture with Mitsui & Co., Ltd. ("Mitsui") under the name Nutrinova. We will account for our interest in the joint venture as an equity method investment, and our portion of the results will continue to be included in the Engineered Materials segment. See Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information.

Results of Operations

Financial Highlights

(unaudited)

(In $ millions, except percentages)

(1) Defined as Operating profit (loss) divided by Net sales.

(unaudited)

36

Factors Affecting Business Segment Net Sales

The percentage increase (decrease) in Net sales attributable to each of the factors indicated for each of our business segments is as follows:

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

(unaudited)

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

(unaudited)

37

Consolidated Results

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

Net sales increased $422 million, or 18%, for the three months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• higher volume in our Engineered Materials segment, primarily related to the M&M Acquisition, as well as our Acetyl Chain segment, due to increased opportunities from industry outages in Asia;

partially offset by:

• lower pricing, primarily driven by our Acetyl Chain segment due to weaker economic conditions particularly in Asia and Europe, as well as our Engineered Materials segment due to decreased energy surcharges, an unfavorable product mix, primarily in Asia and Europe, and market considerations.

Operating profit increased $534 million, or 173%, for the three months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• a gain of $508 million in our Engineered Materials segment recognized on the formation of the Nutrinova joint venture (see Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information);
• higher Net sales in our Engineered Materials segment; and
• lower raw material and sourcing costs in our Acetyl Chain segment, primarily for methanol, acid and ethylene;

partially offset by:

• higher raw material costs and spending in our Engineered Materials segment as a result of the M&M Acquisition; and
• lower Net sales in our Acetyl Chain segment.

Non-operating pension and other postretirement employee benefit (expense) income decreased $26 million, or 104%, for the three months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• higher interest cost and lower expected return on plan assets.

Equity in net earnings (loss) of affiliates decreased $61 million for the three months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• a decrease in equity investment in earnings of $34 million from our Ibn Sina strategic affiliate, primarily as a result of reduced oil prices; and
• losses from our DuPont Teijin Films strategic affiliates due to restructuring.

Depreciation and amortization, which is included in Operating profit, increased for the three months ended September 30, 2023 compared to the same period in 2022, primarily as a result of the M&M Acquisition.

Our effective income tax rate for the three months ended September 30, 2023 was (33)% compared to 40% for the same period in 2022. The lower effective income tax rate was primarily due to deferred tax benefits of $293 million from the relocation of certain intangible assets to align with the foreign operations acquired in the M&M Acquisition, differences in the tax and U.S. GAAP gain from the formation of the Nutrinova joint venture, decreased earnings in high taxed jurisdictions related to current demand conditions and a decrease in valuation allowances on U.S. foreign tax credit carryforwards due to revised forecasts of foreign sourced income and expenses during the carryforward period. See Note 11 - Income Taxes in the accompanying unaudited interim consolidated financial statements for further information.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Net sales increased $1.0 billion, or 14%, for the nine months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• higher volume in our Engineered Materials segment, primarily related to the M&M Acquisition and the KEPCO restructuring (see Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information);

partially offset by:

• lower pricing, primarily in our Acetyl Chain segment due to weaker economic conditions particularly in Asia and Europe and in our Engineered Materials segment due to decreased energy surcharges, market considerations, and an unfavorable product mix, particularly in Asia and Europe;
• lower volume in our Acetyl Chain segment, primarily due to decreased demand in Europe partially offset by increased opportunities from industry outages in Asia; and
• an unfavorable currency impact, primarily resulting from a weaker CNY relative to the U.S. dollar, partially offset by a stronger euro relative to the U.S. dollar.

Operating profit increased $106 million, or 8%, for the nine months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• higher Net sales in our Engineered Materials segment;
• a gain of $508 million in our Engineered Materials segment recognized on the formation of the Nutrinova joint venture (see Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information); and
• lower raw material and sourcing costs in our Acetyl Chain segment, primarily for methanol, ethylene and acid;

partially offset by:

• higher raw material costs and spending in our Engineered Materials segment as a result of the M&M Acquisition;
• lower Net sales in our Acetyl Chain segment; and
• an unfavorable impact of $35 million to Other (charges) gains, net primarily related to Company-wide business optimization projects in the current year (see Note 18 - Other (Charges) Gains, Net in the accompanying unaudited interim consolidated financial statements for further information).

Non-operating pension and other postretirement employee benefit (expense) income decreased $76 million, or 103%, for the nine months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• higher interest cost and lower expected return on plan assets.

Equity in net earnings (loss) of affiliates decreased $139 million or 74% for the nine months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• losses from our DuPont Teijin Films strategic affiliates due to restructuring; and
• a decrease in equity investment in earnings of $45 million from our Ibn Sina strategic affiliate, primarily as a result of reduced oil prices.

Depreciation and amortization, which is included in Operating profit, increased for the nine months ended September 30, 2023 compared to the same period in 2022, primarily as a result of the M&M Acquisition.

Our effective income tax rate for the nine months ended September 30, 2023 was (20)% compared to 24% for the same period in 2022. The lower effective income tax rate was primarily due to deferred tax benefits of $293 million from the relocation of certain intangible assets to align with the foreign operations acquired in the M&M Acquisition, differences in the tax and U.S. GAAP gain from the formation of the Nutrinova joint venture, decreased earnings in high taxed jurisdictions related to current demand conditions and a decrease in valuation allowances on U.S. foreign tax credit carryforwards due to revised forecasts of foreign sourced income and expenses during the carryforward period. See Note 11 - Income Taxes in the accompanying unaudited interim consolidated financial statements for further information.

Business Segments

Engineered Materials

(unaudited)

(In $ millions, except percentages)

Our Engineered Materials segment includes our engineered materials business and certain strategic affiliates. Our engineered materials business develops, produces and supplies a broad portfolio of high performance specialty polymers for automotive and medical applications, as well as industrial products and consumer electronics. Together with our strategic affiliates, our engineered materials business is a leading participant in the global specialty polymers industry.

The pricing of products within the Engineered Materials segment is primarily based on the value of the material we produce and is generally independent of changes in the cost of raw materials, but may be impacted during periods of inflation and increased costs. Therefore, in general, margins may expand or contract in response to changes in raw material costs. We attempt to address increases in raw material costs through appropriate pricing actions.

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

Net sales increased for the three months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• higher volume, primarily related to the M&M Acquisition;

partially offset by:

• lower pricing for most of our products, primarily due to decreased energy surcharges, an unfavorable product mix, particularly in Asia and Europe, and market considerations.

Operating profit increased for the three months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• a gain of $508 million recognized on the formation of the Nutrinova joint venture (see Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information); and
• higher Net sales;

partially offset by:

• higher raw material costs as a result of the M&M Acquisition; and
• higher spending of $133 million as a result of the M&M Acquisition.

Equity in net earnings (loss) of affiliates decreased for the three months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• a decrease in equity investment in earnings of $34 million from our Ibn Sina strategic affiliate, primarily as a result of reduced oil prices; and
• losses from our DuPont Teijin Films strategic affiliates due to restructuring.

Depreciation and amortization, which is included in Operating profit, increased for the three months ended September 30, 2023 compared to the same period in 2022 as a result of the M&M Acquisition.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Net sales increased for the nine months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• higher volume, primarily related to the M&M Acquisition and the KEPCO restructuring (see Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information);

partially offset by:

• lower pricing for most of our products, primarily due to decreased energy surcharges, market considerations, and an unfavorable product mix, primarily in Asia and Europe; and
• an unfavorable currency impact, primarily resulting from a weaker CNY relative to the U.S. dollar, partially offset by a stronger euro relative to the U.S. dollar.

Operating profit increased for the nine months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• higher Net sales; and
• a gain of $508 million recognized on the formation of the Nutrinova joint venture (see Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information);

partially offset by:

• higher raw material costs as a result of the M&M Acquisition;
• higher spending of $507 million as a result of the M&M Acquisition; and
• an unfavorable impact of $30 million to Other (charges) gains, net primarily related to Company-wide business optimization projects in the current year (see Note 18 - Other (Charges) Gains, Net in the accompanying unaudited interim consolidated financial statements for further information).

Equity in net earnings (loss) of affiliates decreased for the nine months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• losses from our DuPont Teijin Films strategic affiliates due to restructuring; and
• a decrease in equity investment in earnings of $45 million from our Ibn Sina strategic affiliate, primarily as a result of reduced oil prices.

Depreciation and amortization, which is included in Operating profit, increased for the nine months ended September 30, 2023 compared to the same period in 2022 as a result of the M&M Acquisition.

Acetyl Chain

(unaudited)

(In $ millions, except percentages)

Our Acetyl Chain segment, which includes the integrated chain of our intermediate chemistry, emulsion polymers, ethylene vinyl acetate polymers, redispersible powders and acetate tow businesses, is active in every major global industrial sector and serves diverse consumer end-use applications. These include conventional uses, such as paints, coatings, adhesives, and filter products, as well as other unique, high-value end uses including flexible packaging, thermal laminations, pharmaceuticals, wire and cable, and compounds. Together with our strategic affiliates, our Acetyl Chain businesses are leading producers and suppliers in multiple global industrial sectors.

The pricing of products within the Acetyl Chain is influenced by industry utilization rates and changes in the cost of raw materials. Therefore, in general, there is a directional correlation between these factors and our Net sales for most Acetyl Chain products. This impact to pricing typically lags changes in raw material costs over months or quarters.

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

Net sales decreased for the three months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• lower pricing for most of our products, primarily vinyl acetate monomer ("VAM"), emulsion polymers and acid, due to weaker economic conditions particularly in Asia and Europe, partially offset by higher pricing for acetate tow;

partially offset by:

• higher volume due to increased opportunities from industry outages in Asia.

Operating profit decreased for the three months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• lower Net sales;

partially offset by:

• lower raw material and sourcing costs, primarily for methanol, acid and ethylene.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Net sales decreased for the nine months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• lower pricing for most of our products, primarily VAM, acid and emulsion polymers, due to weaker economic conditions particularly in Asia and Europe, partially offset by higher pricing for acetate tow;
• lower volume for most of our products due to decreased demand, primarily in Europe, partially offset by increased opportunities from industry outages in Asia; and
• an unfavorable currency impact, primarily resulting from a weaker CNY relative to the U.S. dollar, partially offset by a stronger euro relative to the U.S. dollar.

Operating profit decreased for the nine months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• lower Net sales;

partially offset by:

• lower raw material and sourcing costs, primarily for methanol, ethylene and acid.

Other Activities

(unaudited)

(In $ millions, except percentages)

Other Activities primarily consists of corporate center costs, including administrative activities such as finance, information technology and human resource functions, interest income and expense associated with financing activities and results of our captive insurance companies. Other Activities also includes the components of net periodic benefit cost (interest cost, expected return on assets and net actuarial gains and losses) for our defined benefit pension plans and other postretirement plans not allocated to our business segments.

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

Operating loss increased for the three months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• higher project spending of $21 million, primarily related to the M&M Acquisition;

partially offset by:

• lower functional spending and incentive compensation costs of $16 million.

Non-operating pension and other postretirement employee benefit (expense) income decreased for the three months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• higher interest cost and lower expected return on plan assets.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Operating loss increased for the nine months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• higher project and functional spending of $78 million, primarily related to the M&M Acquisition;

partially offset by:

• a favorable currency impact of $25 million.

Non-operating pension and other postretirement employee benefit (expense) income decreased for the nine months ended September 30, 2023 compared to the same period in 2022, primarily due to:

• higher interest cost and lower expected return on plan assets.

Liquidity and Capital Resources

Our primary sources of liquidity are cash generated from operations, available cash and cash equivalents, dividends from our portfolio of strategic investments and available borrowings under our senior U.S. unsecured revolving credit facility and our China Revolving Credit Facility (defined below). As of September 30, 2023, we have $1.75 billion available for borrowing under our senior U.S. unsecured revolving credit facility and $35 million available for borrowing under our separate China Revolving Credit Facility, if required, to meet our working capital needs and other contractual obligations. In addition, we held cash and cash equivalents of $1.4 billion as of September 30, 2023. We are actively managing our business to maintain and improve cash flow and reduce our debt and we believe that liquidity from the above-referenced sources will be sufficient to meet our operational and capital investment needs and financial obligations for the foreseeable future.

On October 31, 2023, we announced the planned closure of our Polyamide 66 and High-Performance Nylon polymerization units at our facility in Uentrop, Germany to optimize production costs across our global network. As a result of the planned closure, we expect to incur exit and shutdown costs, excluding employee termination costs, of approximately $110 million to $125 million, consisting primarily of accelerated depreciation on property, plant and equipment of approximately $75 million to $85 million and plant closure costs of approximately $35 million to $40 million. In addition, we expect to incur certain employee termination costs, which are subject to works council consultation. All costs resulting from the planned closure are expected to be incurred during 2024.

On September 27, 2023, we formed a food ingredients joint venture with Mitsui & Co., Ltd. ("Mitsui") under the name Nutrinova. We contributed receivables, inventory, property, plant and equipment, certain assets, other liabilities, technology and employees of our food ingredients business while retaining a 30% interest in the joint venture. Mitsui acquired the remaining 70% interest in the food ingredients business for a purchase price of $503 million, subject to transaction adjustments. We are accounting for our interest in the joint venture as an equity method investment, and our portion of the results continue to be included in the Engineered Materials segment. For further information regarding the food ingredients joint venture, see Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements.

In November 2022, we acquired a majority of the M&M Business for a purchase price of $11.0 billion, subject to transaction adjustments, in an all-cash transaction. For further information regarding the acquisition, see Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements.

Our incurrence of debt to finance the purchase price for the M&M Acquisition has increased our leverage and our ratio of indebtedness to consolidated EBITDA as set forth in our senior unsecured credit facilities. We believe that cash flows from our operations, together with cash generation, synergy opportunities from the M&M Acquisition and cost reduction initiatives, will support our deleveraging efforts over the next few years. In furtherance of these deleveraging efforts, we have paused our share repurchase program and are in the process of evaluating additional cash generation opportunities which may also include, in addition to the food ingredients joint venture described above, additional opportunistic dispositions or monetization of other product or business lines or other assets. We are committed to rapid deleveraging and to maintaining our investment grade debt rating.

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 next twelve months. 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.

We continue to prioritize those projects expected to drive productivity in the near term and expect capital expenditures to be approximately $500 million in 2023, primarily associated with certain investments in growth opportunities and productivity improvements. In Engineered Materials, at our Nanjing, China facility, our expansions of (1) the compounding plant and (2) the new liquid crystal polymer ("LCP") plant are in construction. Our energy optimization productivity project at our polyoxymethylene ("POM") unit in Frankfurt, Germany is in detailed engineering design. In the Acetyl Chain, our planned expansion of our acetic acid unit at Clear Lake, Texas is on track to be commissioned in the first quarter of 2024. The other major projects that support the Acetyl Chain are in various stages of construction and on schedule, which include our planned expansions of (1) our vinyl acetate ethylene ("VAE") emulsions units in Nanjing, China, (2) our VAE emulsion plant in Frankfurt, Germany and (3) the sustainable production of methanol ("MeOH") at our Fairway joint venture MeOH unit in Clear Lake, Texas using captured carbon dioxide as feedstock. The expansion of our VAM plant in Bay City, Texas is on temporary hold. We continue to see the incremental capacity from investments made in recent years strengthen our manufacturing network reliability to best serve our customers.

On a stand-alone basis, Celanese and its immediate 100% owned subsidiary, Celanese U.S., have no independent external operations of their own. Accordingly, they generally depend on the cash flow of their subsidiaries and their ability to pay dividends and make other distributions to Celanese and Celanese U.S. in order to meet their obligations, including their obligations under senior credit facilities and senior notes, and to pay dividends on our Common Stock.

We are subject to capital controls and exchange restrictions imposed by the local governments in certain jurisdictions where we operate, such as China, South Korea, India and Indonesia. Capital controls impose limitations on our ability to exchange currencies, repatriate earnings or capital, lend via intercompany loans or create cross-border cash pooling arrangements. Our largest exposure to a country with capital controls is in China. Pursuant to applicable regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, the Chinese government imposes certain currency exchange controls on cash transfers out of China, puts certain limitations on duration, purpose and amount of intercompany loans, and restricts cross-border cash pooling. While it is possible that future tightening of these restrictions or application of new similar restrictions could impact us, these limitations do not currently restrict our operations.

We remain in compliance with the covenants in the Global Credit Agreements (defined below, and as amended to date) and expect to remain in compliance based on our current expectation of future results of operations and planned cash generation activities. If the actual future results of our operations and cash generation activities differ materially from these expectations, we may be required to seek an amendment to or waiver of any impacted covenants, which may increase our borrowing costs under the Global Credit Agreements.

Cash Flows

Cash and cash equivalents decreased $151 million to $1.4 billion as of September 30, 2023 compared to December 31, 2022. As of September 30, 2023, $1.1 billion of the $1.4 billion of cash and cash equivalents was held by our foreign subsidiaries. Under the TCJA, we have incurred a prior year charge associated with the deemed repatriation of previously unremitted foreign earnings, including foreign held cash. These funds are largely accessible over a period of time without additional material tax consequences, if needed in the U.S., to fund operations.

• Net Cash Provided by (Used in) Operating Activities

Net cash provided by operating activities decreased $209 million to $1.1 billion for the nine months ended September 30, 2023 compared to net cash provided by operating activities of $1.3 billion for the same period in 2022, primarily due to:

• a decrease in earnings performance, net of the gain recognized on the formation of the Nutrinova joint venture (see Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information); and
• an increase in cash interest paid of $578 million;

partially offset by:

• favorable trade working capital of $471 million, primarily due to the timing of collections of trade receivables, inventory reduction due to lower volume, lower raw materials costs and cost of inventory, and settlement of trade payables during the nine months ended September 30, 2023; and
• cash receipts of non-trade receivables of $153 million, primarily related to the receivable balances arising from the M&M Acquisition and transaction activities.
• Net Cash Provided by (Used in) Investing Activities

Net cash provided by investing activities increased $462 million to $34 million for the nine months ended September 30, 2023 compared to net cash used in investing activities of $428 million for the same period in 2022; primarily due to:

• a cash inflow of $461 million related to the formation of the Nutrinova joint venture (see Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information).
• Net Cash Provided by (Used in) Financing Activities

Net cash used in financing activities increased $9.6 billion to $1.2 billion for the nine months ended September 30, 2023 compared to net cash provided by financing activities of $8.3 billion for the same period in 2022, primarily due to:

• a decrease in net proceeds of long-term debt of $9.5 billion, primarily due to the Tender Offer (defined below) of $2.25 billion, payment in full of the 3-year Term Loans (defined below) of $750 million, redemption of the 1.125% senior unsecured notes during the nine months ended September 30, 2023 and issuance of the Acquisition Notes during the nine months ended September 30, 2022 (see Note 7 - Debt in the accompanying unaudited interim consolidated financial statements for further information), partially offset by the 2023 Offering (defined below) of $3.0 billion in principal amount during the nine months ended September 30, 2023; and
• an increase in net payments on short-term debt of $180 million, primarily as a result of payments on our revolving credit facilities and payment in full of the 364-day Terms Loans (defined below) partially offset by borrowings on our revolving credit facilities and China Working Capital Term Loan Agreement (defined below);

partially offset by:

• a payment of $63 million during the nine months ended September 30, 2022 for fees related to a bridge facility commitment letter with Bank of America, N.A. ("Bank of America") pursuant to which Bank of America committed to provide, subject to the terms and conditions set forth therein, a 364-day $11.0 billion senior unsecured bridge term loan facility, which payment did not recur in the current year; and
• a decrease in share repurchases of our Common Stock of $17 million during the nine months ended September 30, 2023.

Debt and Other Obligations

In March 2022, we entered into a term loan credit agreement (the "March 2022 U.S. Term Loan Credit Agreement"), pursuant to which lenders provided a tranche of delayed-draw term loans due 364 days from issuance in an amount equal to $500 million (the "364-day Term Loans") and a tranche of delayed-draw term loans due 5 years from issuance in an amount equal to $1.0 billion (the "5-year Term Loans"). In September 2022, we entered into an additional term loan credit agreement (the "September 2022 U.S. Term Loan Credit Agreement" and, together with the March 2022 U.S. Term Loan Credit Agreement, the "U.S. Term Loan Credit Agreements"), pursuant to which lenders provided delayed-draw term loans due 3 years from issuance in an amount equal to $750 million (the "3-year Term Loans" and collectively with the 364-day Term Loans and the 5-year Term Loans, the "U.S. Term Loan Facility"). The U.S. Term Loan Facility was fully drawn during the three months ended December 31, 2022.

Also in March 2022, we entered into a new revolving credit agreement (the "U.S. Revolving Credit Agreement" and, together with the March 2022 U.S. Term Loan Credit Agreement, the "U.S. Credit Agreements") consisting of a $1.75 billion senior unsecured revolving credit facility (with a letter of credit sublimit), maturing in 2027. The proceeds of a $365 million borrowing under the new senior unsecured revolving credit facility were used to repay and terminate our then-existing revolving credit facility.

On February 21, 2023, we amended certain covenants in the U.S. Credit Agreements, including financial ratio maintenance covenants. The U.S. Credit Agreements are guaranteed by Celanese, Celanese U.S. and domestic subsidiaries together representing substantially all of our U.S. assets and business operations.

On January 4, 2023, Celanese (Shanghai) International Trading Co., Ltd ("CSIT"), a fully consolidated subsidiary, entered into a restatement of an existing credit facility agreement (the "China Revolving Credit Agreement") to upsize and modify the facility thereunder to consist of an aggregate CNY1.75 billion uncommitted senior unsecured revolving credit facility available under two tranches (with overdraft, bank guarantee and documentary credit sublimits) (the "China Revolving Credit Facility"). Obligations bear interest at certain fixed and floating rates. The China Revolving Credit Agreement is guaranteed by Celanese U.S.

On January 6, 2023, CSIT entered into a senior unsecured working capital loan contract for CNY800 million (the "China Working Capital Term Loan Agreement", together with the China Revolving Credit Agreement, the "China Credit Agreements," and the China Credit Agreements together with the U.S. Credit Agreements, the "Global Credit Agreements"), payable 12 months from withdrawal date and bearing interest at 0.5% less than certain interbank rates. The loan under the China Working Capital Term Loan Agreement was fully drawn on January 10, 2023 and is supported by a letter of comfort from us. We expect the China Credit Agreements will facilitate our efficient repatriation of cash to the U.S. to repay debt and effectively redomicile a portion of our U.S. debt to China at a lower average interest rate.

On August 24, 2023, we completed a public offering registered under the Securities Act of senior unsecured notes as follows (collectively, the "2023 Offering"):

On August 25, 2023, we completed a cash tender offer for $2.25 billion in aggregate principal amount (the "Tender Offer") as follows:

The net proceeds from the 2023 Offering were used (i) to fund the Tender Offer and (ii) for repayment of other outstanding indebtedness, including the payment in full of the 364-day Term Loans and the 3-year Term Loans.

There have been no material changes to our debt or other obligations described in our 2022 Form 10-K other than those disclosed above and in Note 7 - Debt in the accompanying unaudited interim consolidated financial statements.

Accounts Receivable Purchasing Facility

On June 1, 2023, we entered into an amendment to the amended and restated receivables purchase agreement under our U.S. accounts receivable purchasing facility among certain of our subsidiaries, our wholly-owned, "bankruptcy remote" special purpose subsidiary ("SPE") and certain global financial institutions ("Purchasers"). We de-recognized $1.0 billion and $1.1 billion of accounts receivable under this agreement for the nine months ended September 30, 2023 and year ended December 31, 2022, respectively, and collected $977 million and $1.1 billion of accounts receivable sold under this agreement during the same periods. Unsold U.S. accounts receivable of $110 million were pledged by the SPE as collateral to the Purchasers as of September 30, 2023.

Factoring and Discounting Agreements

We have factoring agreements in Europe and Singapore with financial institutions to sell 100% and 90% of certain accounts receivable, respectively, on a non-recourse basis. We de-recognized $305 million and $320 million of accounts receivable under these factoring agreements for the nine months ended September 30, 2023 and year ended December 31, 2022, respectively, and collected $294 million and $325 million of accounts receivable sold under these factoring agreements during the same periods.

Covenants

We are in compliance with the covenants in our material financing arrangements as of September 30, 2023.

See Note 7 - Debt in the accompanying unaudited interim consolidated financial statements for further information.

Guarantor Financial Information

We have outstanding senior unsecured notes, issued in public offerings registered under the Securities Act of 1933, as amended (collectively, the "Senior Notes"). The Senior Notes were issued by Celanese U.S. ("Issuer") and are guaranteed by Celanese Corporation ("Parent Guarantor") and the Subsidiary Guarantors (collectively the "Obligor Group"). See Note 7 - Debt in the accompanying unaudited interim consolidated financial statements for further information. The Issuer and Subsidiary Guarantors are 100% owned subsidiaries of the Parent Guarantor. The Subsidiary Guarantors are listed in Exhibit 22.1 to this Quarterly Report.

The Parent Guarantor and the Subsidiary Guarantors have guaranteed the Senior Notes on a full and unconditional, joint and several, senior unsecured basis. The guarantees are subject to certain customary release provisions, including that a Subsidiary Guarantor will be released from its respective guarantee in specified circumstances, including (i) the sale or transfer of all of its assets or capital stock; (ii) its merger or consolidation with, or transfer of all or substantially all of its assets to, another person; or (iii) its ceasing to be a majority-owned subsidiary of the Issuer in connection with any sale of its capital stock or other transaction. Additionally, a Subsidiary Guarantor will be released from its guarantee of the Senior Notes at such time that it ceases to guarantee the Issuer's obligations under the U.S. Credit Agreements (subject to the satisfaction of customary document delivery requirements). The obligations of the Subsidiary Guarantors under their guarantees are limited as necessary to prevent such guarantees from constituting a fraudulent conveyance or fraudulent transfer under applicable law.

The Parent Guarantor and the Issuer are holding companies that conduct substantially all of their operations through their subsidiaries, which own substantially all of our consolidated assets. The Parent Guarantor has no material assets other than the stock of its immediate 100% owned subsidiary, the Issuer. The principal source of cash to pay the Parent Guarantor's and the Issuer's obligations, including obligations under the Senior Notes and the guarantee of the Issuer's obligations under the U.S. Credit Agreements, is the cash that our subsidiaries generate from their operations. Each of the Subsidiary Guarantors and our non-guarantor subsidiaries is a distinct legal entity and, under certain circumstances, applicable country or state laws, regulatory limitations and terms of other debt instruments may limit our subsidiaries' ability to distribute cash to the Issuer and the Parent Guarantor.

For cash management purposes, we transfer cash among 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. While the non-guarantor subsidiaries do not guarantee the Issuer's obligations under our outstanding debt, 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 Senior Notes, U.S. Credit Agreements, other outstanding debt, Common Stock dividends and Common Stock repurchases.

The summarized financial information of the Obligor Group is presented below on a combined basis after the elimination of: (i) intercompany transactions among such entities and (ii) equity in earnings from and investments in the non-guarantor subsidiaries. Transactions with, and amounts due to or from, non-guarantor subsidiaries and affiliates are separately disclosed.

(unaudited)

48

(unaudited)

Share Capital

We declared a quarterly cash dividend of $0.70 per share on our Common Stock on October 18, 2023, amounting to $76 million.

There have been no material changes to our share capital described in our 2022 Form 10-K other than those disclosed above and in Note 10 - Shareholders' Equity in the accompanying unaudited interim consolidated financial statements.

Contractual Obligations

We have not entered into any material off-balance sheet arrangements.

Except as otherwise described in this report, there have been no material revisions outside the ordinary course of business to our contractual obligations as described in our 2022 Form 10-K.

Tax Return Audits

Our tax returns are under joint audit for the years 2013 through 2015 by the United States, Netherlands and Germany. In addition, our income tax returns in Mexico are under audit for the year 2018 and in Canada for the years 2016 through 2022. In August 2023, we negotiated a partial settlement with the Mexico tax authorities for its audit for the year 2018. The partial settlement did not have a material impact on income tax expense in the unaudited interim consolidated statement of operations for the three and nine months ended September 30, 2023. In September 2023, the Canadian tax authorities opened tax audits for the years 2019 through 2022, and the audits are in the preliminary stages. As of September 30, 2023, we believe that an adequate provision for income taxes has been made for all open tax years related to the examinations by government authorities. However, the outcome of tax audits cannot be predicted with certainty. If any issues raised by the government authorities are resolved in a manner inconsistent with our expectations or we are unsuccessful in defending its positions, we could be required to adjust our provision for income taxes in the period such resolution occurs. If required, any such adjustments could be material to the statements of operations and cash flows in the period(s) recorded. See Note 11 - Income Taxes in the accompanying unaudited interim consolidated financial statements for further information.

Business Environment

We continued to experience destocking in addition to volatile underlying demand conditions across several end-markets. We continue to closely monitor the impact of, and responses to, geopolitical effects on demand conditions and the supply chain. Demand conditions and moderating raw materials costs resulted in elevated industry competitive dynamics and continuing pricing pressure across many end-markets. We expect demand and destocking challenges to persist, to put pressure on pricing partially offset by improvement in input costs across the year.

Following Russia's invasion of Ukraine, we suspended sales into Russia, Belarus and the sanctioned regions of Ukraine. Revenue from these countries and regions constituted less than 0.1% of our consolidated Net sales in fiscal year 2022 and we have no manufacturing assets in these countries or regions. We do not currently expect the conflict to result in a material impact on our business or financial results, but the full impact of the conflict and international responses thereto remains uncertain and will depend on future geopolitical and economic developments that are impossible to predict. Potential risks we may face include increased volatility in capital and commodity markets, rapid changes to sanctions, supply chain and transportation disruptions, exacerbation of inflationary conditions, impacts to consumer or business sentiment and an increased risk of cyber security incidents.

Critical Accounting Policies and Estimates

Our unaudited interim consolidated financial statements are based on the selection and application of significant accounting policies. The preparation of unaudited interim consolidated financial statements in conformity with U.S. 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. 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 the Consolidated Financial Statements included in our 2022 Form 10-K. We discuss our critical accounting policies and estimates in MD&A in our 2022 Form 10-K.

Recent Accounting Pronouncements

See Note 2 - Recent Accounting Pronouncements in the accompanying unaudited interim consolidated financial statements included in this Quarterly Report for information regarding recent accounting pronouncements.

Market risk for the Company has not changed materially from the foreign exchange, interest rate and commodity risks disclosed in Item 7A. Quantitative and Qualitative Disclosures about Market Risk in our 2022 Form 10-K. See also Note 12 - Derivative Financial Instruments in the accompanying unaudited interim consolidated financial statements for further discussion of our market risk management and the related impact on the Company's financial position and results of operations.

Disclosure 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 Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based on that evaluation, as of September 30, 2023, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

During the period covered by this report, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In addition to the information in this Quarterly Report, readers should carefully consider the information in Part I, Item 1A. Risk Factors of our 2022 Form 10-K.