THE CHEMOURS COMPANY
This Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") supplements the Consolidated Financial Statements and the
related notes thereto included elsewhere herein to help provide an understanding
of our financial condition, changes in our financial condition, and the results
of our operations for the years ended December 31, 2019 and 2018 and the changes
therein. For the year ended December 31, 2017 , and changes from the year ended
December 31, 2017 to the year ended December 31, 2018 , management's discussion
and analysis pertaining to our financial condition, changes in our financial
condition, and the results of our operations have been omitted from this MD&A
and may be found in Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations as included in our Annual Report on Form
10-K for the year ended December 31, 2018 .
Our forward-looking statements are based on certain assumptions and expectations
of future events that may not be accurate or realized. These statements, as well
as our historical performance, are not guarantees of future performance.
Forward-looking statements also involve risks and uncertainties that are beyond
our control. Additionally, there may be other risks and uncertainties that we
are unable to identify at this time or that we do not currently expect to have a
material impact on our business. Factors that could cause or contribute to these
differences include, but are not limited to, the risks, uncertainties, and other
factors discussed within Item 1A - Risk Factors.
This MD&A should be read in conjunction with the Consolidated Financial Statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K.
Overview We are a leading, global provider of performance chemicals that are key inputs in end-products and processes in a variety of industries. We deliver customized solutions with a wide range of industrial and specialty chemical products for markets, including plastics and coatings, refrigeration and air conditioning, general industrial, electronics, mining, and oil refining. Our principal products include refrigerants, industrial fluoropolymer resins, sodium cyanide, performance chemicals and intermediates, and TiO2 pigment. We manage and report our operating results through three reportable segments: Fluoroproducts, Chemical Solutions, and Titanium Technologies. Our Fluoroproducts segment is a leading, global provider of fluoroproducts, including refrigerants and industrial fluoropolymer resins. Our Chemical Solutions segment is a leading, North American provider of industrial chemicals used in gold production, industrial, and consumer applications. Our Titanium Technologies segment is a leading, global provider of TiO2 pigment, a premium white pigment used to deliver whiteness, brightness, opacity, and protection in a variety of applications. Recent Developments
Fayetteville Works,
In
In connection with the Consent Order, a thermal oxidizer ("TO") became fully
operational at the site in December 2019 , and we switched to the permitted
operating scenario for the TO on December 31, 2019 as required by the Consent
Order. The TO is designed to reduce aerial PFAS emissions from Fayetteville ,
and, within 90 days of installation, we, along with the North Carolina Division
of Air Quality , will conduct testing to confirm whether the TO is destroying
99.99% of all PFAS air emissions routed to it, utilizing a 2017 baseline.
In the fourth quarter of 2019, we completed and submitted our Cape Fear River
PFAS Loading Reduction Plan - Supplemental Information Report and Corrective
Action Plan ("CAP") to NC DEQ. The Supplemental Information Report provides
information to support the evaluation of potential remedial options to reduce
PFAS loadings to surface waters, including interim alternatives. The CAP
describes potential remediation activities to address PFAS in on-site
groundwater and surface waters at the site, in accordance with the requirements
of the Consent Order and the North Carolina groundwater standards, and builds on
the previous submissions to NC DEQ. In the fourth quarter of 2019, based on the
Consent Order, CAP, and our plans, we accrued an additional $132 million related
to the estimated cost of on-site remediation.
See "Note 22 - Commitments and Contingent Liabilities" to the Consolidated
Financial Statements for further information about environmental remediation at
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The Chemours Company Netherlands Pension Plan In the fourth quarter of 2019, we completed a settlement transaction related to a significant portion of ourNetherlands pension plan. The future risk, responsibility, and administration associated with the$932 million of inactive participants' vested pension benefits was transferred to a third-party asset management company via an irrevocable transaction inDecember 2019 , thereby eliminating our exposure to the pension liabilities and formally effecting the settlement. The cumulative loss associated with the inactive participants' vested pension benefits was recognized in earnings, resulting in a charge of$380 million recognized in other expense, net in the consolidated statements of operations. AtDecember 31, 2019 , the projected benefit obligations associated with the plan's active employees remained on our consolidated balance sheet. 2019 Restructuring Program In an effort to better align our cost structure with market opportunities, we recorded net severance charges of$22 million during the year endedDecember 31, 2019 . Impacted employees are subject to our customary involuntary termination benefits. The majority of the employees separated from the Company during the fourth quarter of 2019, and the majority of the associated severance payments will be made by the end of 2020. Also, in the third quarter of 2019, we announced plans to exit the Methylamines and Methylamides business at ourBelle, West Virginia manufacturing plant, which culminated in our completed exit and sale of the business toBelle Chemical Company , a subsidiary ofCornerstone Chemical Company , in the fourth quarter of 2019. As a result, for the year endedDecember 31, 2019 , we recorded accelerated depreciation of$34 million , which is reflected as a component of restructuring, asset-related, and other charges in the consolidated statement of operations. Upon completion of the sale, we also recorded an additional pre-tax loss on sale of$2 million , net of a benefit from working capital adjustments, in other expense, net in the consolidated statements of operations. Both of the aforementioned charges relate to Chemical Solutions, and we do not expect to incur additional charges related to our exit of the Methylamines and Methylamides business.
Accounts Receivable Securitization Facility
InJuly 2019 , we, through a wholly-owned special purpose entity, entered into an accounts receivable securitization facility ("Securitization Facility") to enhance our liquidity. The original borrowings amounted to$125 million , which, along with available cash, was used to pay down our then outstanding revolving loan. AtDecember 31, 2019 , our net borrowings under the Securitization Facility were$110 million . Capital Allocation For the year endedDecember 31, 2019 , we returned$486 million in cash to our shareholders by purchasing$322 million in our issued and outstanding common stock under our 2018 Share Repurchase Program, and through the payment of$164 million in cash dividends, thereby fulfilling our goal of returning the majority of our free cash flows to shareholders.
At
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The Chemours Company Results of Operations and Business Highlights
Results of Operations
The following table sets forth our results of operations for the years ended
Year Ended December 31,
(Dollars in millions, except per share amounts) 2019 2018
Net sales $ 5,526 $ 6,638
Cost of goods sold 4,463 4,667
Gross profit 1,063 1,971
Selling, general, and administrative expense 548 657
Research and development expense 80 82 Restructuring, asset-related, and other charges 87 49 Total other operating expenses 715
788
Equity in earnings of affiliates 29 43 Interest expense, net (208 ) (195 ) Loss on extinguishment of debt - (38 ) Other (expense) income, net (293 )
162
(Loss) income before income taxes (124 )
1,155
(Benefit from) provision for income taxes (72 )
159
Net (loss) income (52 )
996
Less: Net income attributable to non-controlling interests - 1 Net (loss) income attributable to Chemours $ (52 ) $
995
Per share data Basic (loss) earnings per share of common stock $ (0.32 ) $
5.62
Diluted (loss) earnings per share of common stock (0.32 ) 5.45 Net Sales
The following table sets forth the impacts of price, volume, and currency on our
net sales for the year ended
Year Ended December 31 ,
Change in net sales from prior period 2019
Price (2 )%
Volume (14 )%
Currency (1 )%
Total change in net sales (17 )%
Our net sales decreased by $1.1 billion (or 17%) to $5.5 billion for the year
ended December 31, 2019 , compared with net sales of $6.6 billion for the same
period in 2018. The components of the decrease in our net sales by segment for
the year ended December 31, 2019 were as follows: in our Fluoroproducts segment,
price declined 2% and volume was down 4%; in our Chemical Solutions segment,
price declined 4% and volume was down 7%; and, in our Titanium Technologies
segment, price declined 1% and volume was down 24%. Unfavorable currency
movements also added a 1% headwind to net sales in our Fluoroproducts and
Titanium Technologies segments.
The drivers of these changes for each of our segments are discussed further under the heading "Segment Reviews" within this MD&A.
Cost of Goods Sold
Our cost of goods sold ("COGS") decreased by $204 million (or 4%) to $4.5
billion for the year ended December 31, 2019 , compared with COGS of $4.7 billion
for the same period in 2018. The decrease in our COGS for the year ended
December 31, 2019 was primarily attributable to lower net sales volumes, as well
as lower distribution, freight, and logistics expenses. These decreases were
partially offset by operational headwinds in our Fluoroproducts segment, and
higher raw materials costs and lower fixed cost absorption in our Titanium
Technologies segment. Additionally, during the year ended December 31, 2019 , we
incurred $150 million for environmental remediation activities related to
Fayetteville .
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The Chemours Company Selling, General, and Administrative Expense
Our selling, general, and administrative ("SG&A") expense decreased by $109
million (or 17%) to $548 million for the year ended December 31, 2019 , compared
with SG&A expense of $657 million for the same period in 2018. The decrease in
our SG&A expense for the year ended December 31, 2019 was primarily attributable
to lower performance-related compensation costs, as well as costs incurred for
our 2018 debt transactions, which did not recur in 2019. The year ended December
31, 2018 also included the accrual of $63 million for estimated liabilities
associated with ongoing environmental matters at Fayetteville . These comparative
decreases for the year ended December 31, 2019 are partially offset by $18
million incurred during the first quarter of 2019, in connection with the
approved final Consent Order to settle certain legal and environmental matters
at Fayetteville .
Research and Development Expense
Our R&D expense was largely unchanged at
Restructuring, Asset-related, and Other Charges
Our restructuring, asset-related, and other charges amounted to
For the year endedDecember 31, 2019 , our restructuring, asset-related, and other charges were primarily attributable to$22 million of employee separation charges incurred in connection with our 2019 Restructuring Program, as well as$34 million of accelerated depreciation recorded in conjunction with our exit of the Methylamines and Methylamides business at ourBelle, West Virginia manufacturing plant. We also recognized$20 million in decommissioning and dismantling-related charges, primarily attributable to the demolition and removal of certain unused buildings at our Chambers Works site inDeepwater, New Jersey , as well as$9 million of accelerated depreciation associated with the discontinuation of the titanium tetrachloride product line at ourNew Johnsonville, Tennessee site. For the year endedDecember 31, 2018 , our restructuring, asset-related, and other charges were primarily attributable to employee separation and other charges incurred in connection with our 2017 restructuring program of$27 million , and employee separation charges of$5 million for our 2018 restructuring program. In addition, we recognized$13 million in decommissioning and dismantling-related charges, primarily attributable to the demolition and removal of certain unused buildings at our Chambers Works site inDeepwater, New Jersey , and an asset-related charge of$4 million for a goodwill impairment in our Chemical Solutions segment.
Equity in Earnings of Affiliates
Our equity in earnings of affiliates decreased by$14 million (or 33%) to$29 million for the year endedDecember 31, 2019 , compared with equity in earnings of affiliates of$43 million for the same period in 2018. The decrease in our equity in earnings of affiliates for the year endedDecember 31, 2019 was primarily attributable to global semiconductor and automotive market softness for our equity method investees in the Fluoroproducts segment. Interest Expense, Net Our interest expense, net increased by$13 million (or 7%) to$208 million for the year endedDecember 31, 2019 , compared with interest expense, net of$195 million for the same period in 2018. The increase in our interest expense, net for the year endedDecember 31, 2019 was primarily attributable to a reduction in interest income earned on lower cash and cash equivalents balances, as well as less interest capitalized following the completion or stoppage of certain of our large-scale construction projects. These increases were partially offset by lower interest expense following our 2018 debt transactions.
Loss on Extinguishment of Debt
For the year ended
For the year endedDecember 31, 2018 , we recognized a combined loss on extinguishment of debt of$38 million in connection with the amendment and restatement of our credit agreement, and our tender offers to purchase any and all of our outstanding euro-denominated 6.125% senior unsecured notes dueMay 2023 and a portion of our outstandingU.S. dollar-denominated 6.625% senior unsecured notes dueMay 2023 . 37
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The Chemours Company Other Income (Expense), Net Our other income, net decreased by$455 million to other expense, net of$293 million for the year endedDecember 31, 2019 , compared with other income, net of$162 million for the same period in 2018. The decrease in our other income, net for the year endedDecember 31, 2019 was primarily attributable to$368 million in non-operating pension and other post-retirement employee benefit loss, which is inclusive of a$380 million expense recognized upon settlement of the portion of ourNetherlands pension plan pertaining to inactive participants' vested pension benefits. We also experienced a decrease in miscellaneous income, which is primarily attributable to$26 million lower EU fluorinated greenhouse gas ("F-Gas") quota authorization sales. The comparative decrease in our other income, net is also reflective of a$42 million gain on the sale of ourLinden, New Jersey site during the year endedDecember 31, 2018 . These decreases were partially offset by recognition of a previously deferred non-cash gain of$9 million during the year endedDecember 31, 2019 . The gain, which was associated with the sale of our Repauno site inGibbstown, New Jersey , had been deferred until certain environmental obligations were fulfilled.
Provision for (Benefit from) Income Taxes
Our benefit from income taxes amounted to
The$231 million decrease in our provision for income taxes for the year endedDecember 31, 2019 , when compared with the same period in 2018, was primarily attributable to reduced profitability and the geographic mix of our earnings. In addition, our benefit from income taxes for the year endedDecember 31, 2019 included$14 million in windfall benefit from our share-based payments, which was partially offset by an$8 million valuation allowance on certain foreign subsidiary earnings and certain foreign tax credits. Our provision for income taxes for the year endedDecember 31, 2018 included$14 million in windfall benefit from our share-based payments, a$15 million benefit from the release of a valuation allowance against our foreign tax credits, and a net$10 million benefit from certain other provisions ofU.S. tax reform. Segment Reviews Adjusted earnings before interest, taxes, depreciation, and amortization ("Adjusted EBITDA") is the primary measure of segment performance used by our Chief Operating Decision Maker ("CODM") and is defined as income (loss) before income taxes, excluding the following:
• interest expense, depreciation, and amortization;
• non-operating pension and other post-retirement employee benefit costs,
which represents the component of net periodic pension (income) costs
excluding the service cost component;
• exchange (gains) losses included in other income (expense), net;
• restructuring, asset-related, and other charges;
• asset impairments;
• (gains) losses on sales of assets and businesses; and,
• other items not considered indicative of our ongoing operational performance
and expected to occur infrequently.
A reconciliation of Adjusted EBITDA to net income (loss) attributable to
Chemours for the years ended
The following table sets forth our Adjusted EBITDA by segment for the years
ended
Year Ended December 31,
(Dollars in millions) 2019 2018
Fluoroproducts $ 578 $ 783
Chemical Solutions 80 64
Titanium Technologies 505 1,055
Segment Adjusted EBITDA 1,163 1,902
Corporate and Other (143 ) (162 )
Total Adjusted EBITDA $ 1,020 $ 1,740
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The Chemours Company
Fluoroproducts
The following table sets forth the net sales, Adjusted EBITDA, and Adjusted
EBITDA margin amounts for our Fluoroproducts segment for the years ended
December 31, 2019 and 2018.
Year Ended December 31,
(Dollars in millions) 2019 2018
Segment net sales $ 2,648 $ 2,862
Adjusted EBITDA 578 783
Adjusted EBITDA margin 22 % 27 %
The following table sets forth the impacts of price, volume, and currency on our
Fluoroproducts segment's net sales for the year ended
Year Ended December 31 ,
Change in segment net sales from prior period 2019
Price (2 )%
Volume (4 )%
Currency (1 )%
Total change in segment net sales (7 )%
Segment Net Sales
Our Fluoroproducts segment's net sales decreased by $214 million (or 7%) to $2.6
billion for the year ended December 31, 2019 , compared with segment net sales of
$2.9 billion for the same period in 2018. The decrease in segment net sales for
the year ended December 31, 2019 was primarily attributable to decreases in
volume and price of 4% and 2%, respectively. Illegal imports of legacy HFC
refrigerants into the EU, in violation of the EU's F-gas regulations, impacted
both volume and price during the year ended December 31, 2019 . Volumes also
declined due to lower demand for our legacy base refrigerants and polymers,
which was driven by softness in global markets, primarily the automotive and
electronics markets. These decreases were partially offset by volume increases
from the continued adoption of OpteonTM products in mobile applications and
growth in high-grade Fluoropolymers sales. Unfavorable currency movements added
a 1% headwind to the segment's net sales during the year ended December 31,
2019 .
Segment Adjusted EBITDA and Adjusted EBITDA Margin
Segment Adjusted EBITDA decreased by$205 million (or 26%) to$578 million and segment Adjusted EBITDA margin decreased by approximately 500 basis points to 22% for the year endedDecember 31, 2019 , compared with segment Adjusted EBITDA of$783 million and segment Adjusted EBITDA margin of 27% for the same period in 2018. The decreases in segment Adjusted EBITDA and segment Adjusted EBITDA margin for the year endedDecember 31, 2019 were primarily attributable to the aforementioned decreases in the price and volume and unfavorable currency movements in the segment's net sales. We also experienced increased costs during the year endedDecember 31, 2019 due to the start-up of our new OpteonTM refrigerants facility inCorpus Christi, Texas , and unplanned outages at certain facilities. Additionally, our F-gas quota authorization sales decreased by$26 million when compared to the year endedDecember 31, 2018 . The segment's operating results for the years endedDecember 31, 2019 and 2018 included$22 million and$34 million , respectively, of additional costs for process waste water treatment atFayetteville . We expect to continue to incur these costs as we actively work with the NC DEQ to resolve the suspension of our National Pollutant Discharge Elimination System permit. 39 --------------------------------------------------------------------------------
The Chemours Company Chemical Solutions
The following table sets forth the net sales, Adjusted EBITDA, and Adjusted
EBITDA margin amounts for our Chemical Solutions segment for the years ended
Year Ended December 31,
(Dollars in millions) 2019 2018
Segment net sales $ 533 $ 602
Adjusted EBITDA 80 64
Adjusted EBITDA margin 15 % 11 %
The following table sets forth the impacts of price, volume, and currency on our
Chemical Solutions segment's net sales for the year ended
Year Ended December 31 ,
Change in segment net sales from prior period 2019
Price (4 )%
Volume (7 )%
Currency - %
Total change in segment net sales (11 )%
Segment Net Sales
Our Chemical Solutions segment's net sales decreased by $69 million (or 11%) to
$533 million for the year ended December 31, 2019 , compared with segment net
sales of $602 million for the same period in 2018. The decrease in segment net
sales for the year ended December 31, 2019 was primarily attributable to
decreases in volume and price of 7% and 4%, respectively, which were driven by
operational issues at a key customer mine in Mining Solutions and lower prices
for certain Performance Chemicals and Intermediates products, mainly driven by
mix and raw material cost pass-throughs as stipulated in certain contracts.
Segment Adjusted EBITDA and Adjusted EBITDA Margin
Segment Adjusted EBITDA increased by$16 million (or 25%) to$80 million and segment Adjusted EBITDA margin increased by approximately 400 basis points to 15% for the year endedDecember 31, 2019 , compared with segment Adjusted EBITDA of$64 million and segment Adjusted EBITDA margin of 11% for the same period in 2018. The increases in segment Adjusted EBITDA and segment Adjusted EBITDA margin for the year endedDecember 31, 2019 were primarily attributable to increased license income and lower cost of goods sold, partially offset by the aforementioned decreases in net sales. 40
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The Chemours Company
Titanium Technologies
The following table sets forth the net sales, Adjusted EBITDA, and Adjusted
EBITDA margin amounts for our Titanium Technologies segment for the years ended
December 31, 2019 and 2018.
Year Ended December 31,
(Dollars in millions) 2019 2018
Segment net sales $ 2,345 $ 3,174
Adjusted EBITDA 505 1,055
Adjusted EBITDA margin 22 % 33 %
The following table sets forth the impacts of price, volume, and currency on our
Titanium Technologies segment's net sales for the year ended
Year Ended December 31 ,
Change in segment net sales from prior period 2019
Price (1 )%
Volume (24 )%
Currency (1 )%
Total change in segment net sales (26 )%
Segment Net Sales
Our Titanium Technologies segment's net sales decreased by $829 million (or 26%)
to $2.3 billion for the year ended December 31, 2019 , compared with segment net
sales of $3.2 billion for the same period in 2018. The decrease in segment net
sales for the year ended December 31, 2019 was primarily attributable to a 24%
decrease in volume, driven by lower TiPureTM TiO2 net sales volumes due to
market destocking and share loss. Price declined modestly by 1%, primarily due
to customer, regional, and channel mix, but remained largely stable as a result
of our TVS strategy. We also experienced a 1% headwind from unfavorable currency
movements.
Segment Adjusted EBITDA and Adjusted EBITDA Margin
Segment Adjusted EBITDA decreased by$550 million (or 52%) to$505 million and segment Adjusted EBITDA margin decreased by approximately 1,100 basis points to 22% for the year endedDecember 31, 2019 , compared with segment Adjusted EBITDA of$1.1 billion and segment Adjusted EBITDA margin of 33% for the same period in 2018. The decreases in segment Adjusted EBITDA and segment Adjusted EBITDA margin for the year endedDecember 31, 2019 were primarily attributable to the aforementioned decreases in segment net sales volume associated with market destocking and share loss, as well as margin compression due to higher costs for certain raw materials and lower fixed cost absorption as we reduced production rates to match reduced customer demand. Corporate and Other Corporate costs and certain legacy legal and environmental expenses, stock-based compensation costs, and foreign exchange gains and losses arising from the remeasurement of balances in currencies other than the functional currency of our legal entities are reflected in Corporate and Other. Corporate and Other costs decreased by$19 million (or 12%) to$143 million for the year endedDecember 31, 2019 , compared with Corporate and Other costs of$162 million for the same period in 2018. The decrease in Corporate and Other costs for the year endedDecember 31, 2019 was primarily attributable to lower performance-related compensation and lower costs for certain legacy legal matters. 41
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The Chemours Company 2020 Outlook Our 2020 results will be driven by the following expectations: (i) 2020 volume for our Titanium Technologies segment will continue to recover as we further execute our TVS strategy; (ii) there will be continued transition to OpteonTM refrigerants in our Fluoroproducts segment, which will be offset by the impacts of illegal imports of legacy HFC refrigerants into the EU in violation of the region's F-gas regulations; and, (iii) there will be continued demand for Mining Solutions products in our Chemical Solutions segment. We expect that our capital expenditures will be approximately$400 million . Our outlook for 2020 reflects our current visibility and expectations based on market factors, such as currency movements, macro-economic factors, and end-market demand. In particular, end-market demand may be impacted by factors beyond our control, such as the recent spread of the novel coronavirus. Our ability to meet our expectations are subject to numerous risks, including, but not limited to, those described in Item 1A - Risk Factors.
Liquidity and Capital Resources
Our primary sources of liquidity are cash generated from operations, available cash, receivables securitization, and borrowings under our debt financing arrangements, which are described in further detail in "Note 20 - Debt" to the Consolidated Financial Statements. We believe these sources are sufficient to fund our planned operations and to meet our interest, dividend, and contractual obligations. Our financial policy seeks to: (i) selectively invest in organic and inorganic growth to enhance our portfolio, including certain strategic capital investments; (ii) return cash to shareholders through dividends and share repurchases; and, (iii) maintain appropriate leverage by using free cash flows to repay outstanding borrowings. Subject to approval by our board of directors, we may raise additional capital or borrowings from time to time, or seek to refinance our existing debt. There can be no assurances that future capital or borrowings will be available to us, and the cost and availability of new capital or borrowings could be materially impacted by market conditions. Further, the decision to refinance our existing debt is based on a number of factors, including general market conditions and our ability to refinance on attractive terms at any given point in time. Any attempts to raise additional capital or borrowings, or refinance our existing debt, could cause us to incur significant charges. Such charges could have a material impact on our financial position, results of operations, or cash flows. Our operating cash flow generation is driven by, among other things, the general global economic conditions at any point in time and their resulting impacts on demand for our products, raw materials and energy prices, and industry-specific issues, such as production capacity and utilization. We have generated strong operating cash flows through various industry and economic cycles, evidencing the operating strength of our businesses. InMay 2018 , we completed our$500 million 2017 Share Repurchase Program. OnAugust 1, 2018 , our board of directors increased our quarterly cash dividend to$0.25 per share. Additionally, onAugust 1, 2018 , our board of directors approved the 2018 Share Repurchase Program, which authorizes us to purchase shares of our issued and outstanding common stock in an aggregate amount not to exceed$750 million , plus any fees or costs in connection with our share repurchase activity. OnFebruary 13, 2019 , our board of directors increased the authorization amount of the 2018 Share Repurchase Program to$1.0 billion . The 2018 Share Repurchase Program became effective onAugust 1, 2018 and will continue through the earlier of its expiration onDecember 31, 2020 , or the completion of repurchases up to the approved amount. To date, we have repurchased$572 million of our common stock under the 2018 Share Repurchase Program. We anticipate making significant payments for interest, capital expenditures, environmental remediation costs and investments, dividends, and other actions over the next 12 months, which we expect to fund through cash generated from operations, available cash, receivables securitization, and borrowings. We further anticipate that our operations and existing debt financing arrangements will provide us with sufficient liquidity over the next 12 months. The availability under our revolving credit facility is subject to the last 12 months of consolidated EBITDA, as defined in the amended and restated credit agreement, which is discussed further in "Note 20 - Debt" to the Consolidated Financial Statements. AtDecember 31, 2019 , we had total cash and cash equivalents of$943 million , of which,$839 million was held by our foreign subsidiaries. All of the cash and cash equivalents held by our foreign subsidiaries is readily convertible into currencies used in our operations, including theU.S. dollar. The cash and earnings of our foreign subsidiaries are generally used to finance their operations and capital expenditures. AtDecember 31, 2019 , management believed that sufficient liquidity was available in theU.S. , which includes borrowing capacity under our revolving credit facility, and it is our intention to indefinitely reinvest the historical pre-2018 earnings of our foreign subsidiaries. Beginning in 2018, management asserts that only certain foreign subsidiaries are indefinitely reinvested. See "Note 9 - Income Taxes" to the Consolidated Financial Statements for further information related to our income tax positions. 42
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The Chemours Company
Cash Flows
The following table sets forth a summary of the net cash provided by (used for)
our operating, investing, and financing activities for the years ended December
31, 2019 and 2018.
Year Ended December 31,
(Dollars in millions) 2019 2018
Cash provided by operating activities
(483 ) (487 )
Cash used for financing activities (419 ) (993 )
Operating Activities
We received $650 million and $1.1 billion in cash flows from our operating
activities for the years ended December 31, 2019 and 2018, respectively. The
decrease in our operating cash inflows for the year ended December 31, 2019 was
primarily attributable to a decrease in our net income, despite reduction in our
finished products inventories to align with decreased sales volumes during the
year ended December 31, 2019 when compared to the prior year. We also made cash
payments for certain raw materials purchases that occurred during the fourth
quarter of 2018.
Investing Activities
We used $483 million in cash flows for our investing activities during the year
ended December 31, 2019 . Our investing cash outflows for the year ended December
31, 2019 were primarily attributable to purchases of property, plant, and
equipment amounting to $481 million , as well as $10 million in total cash
consideration payments for the acquisition of Southern Ionics Minerals, LLC .
These investing cash outflows were partially offset by proceeds from the sales
of assets and businesses of $9 million , which were primarily attributable to $4
million received from the sale of our Oakley, California site and $2 million
received from the sale of our Methylamines and Methylamides business.
We used $487 million in cash flows for our investing activities during the year
ended December 31, 2018 . Our investing cash outflows for the year ended December
31, 2018 were primarily attributable to purchases of property, plant, and
equipment amounting to $498 million , and $37 million in total cash consideration
payments for the acquisition of ICOR International, Inc. These investing cash
outflows were partially offset by proceeds from the sales of assets and
businesses of $46 million , which were primarily attributable to the sale of our
Linden, New Jersey site for $39 million .
Financing Activities
We used $419 million in cash flows for our financing activities during the year
ended December 31, 2019 . Our financing cash outflows for the year ended December
31, 2019 were primarily attributable to our capital allocation activities,
resulting in $486 million of cash returned to shareholders through our 2018
Share Repurchase Program and through cash dividends paid. In addition, we made
$30 million in payments for withholding taxes on certain of our vested
stock-based compensation awards. We also drew $150 million on our revolving
credit facility for general corporate purposes. We subsequently repaid the
revolver borrowing in full, primarily using the $125 million proceeds originally
received from the Securitization Facility, as well as available cash. During the
year ended December 31, 2019 , we also repaid a net $15 million of the borrowings
from the Securitization Facility. The Securitization Facility is further
described in "Note 20 - Debt" to the Consolidated Financial Statements.
We used $993 million in cash flows for our financing activities during the year
ended December 31, 2018 . Our financing cash outflows for the year ended December
31, 2018 were primarily attributable to the following: $679 million in debt
repayments and $29 million in "make-whole" premium payments in connection with
our debt refinancing activities, as well as scheduled principal repayments; $644
million for purchases of our issued and outstanding common stock under our share
repurchase programs; and, $148 million for payments of cash dividends. These
financing cash outflows were partially offset by $520 million in net proceeds
from the issuance of our euro-denominated 4.000% senior unsecured notes due May
2026 .
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The Chemours Company
Current Assets
The following table sets forth the components of our current assets at December
31, 2019 and 2018.
December 31,
(Dollars in millions) 2019 2018
Cash and cash equivalents $ 943 $ 1,201
Accounts and notes receivable, net 674 861
Inventories 1,079 1,147
Prepaid expenses and other 81 84
Total current assets $ 2,777 $ 3,293
Our accounts and notes receivable, net decreased by $187 million (or 22%) to
$674 million at December 31, 2019 , compared with accounts and notes receivable,
net of $861 million at December 31, 2018 . The decrease in our accounts and notes
receivable, net at December 31, 2019 was primarily attributable to lower net
sales in the fourth quarter of 2019 versus the same period in 2018, as well as
the timing of payments from our customers.
Our inventories decreased by $68 million (or 6%) to $1.1 billion at December 31,
2019 , compared with inventories of $1.1 billion at December 31, 2018 . The
decrease in our inventories at December 31, 2019 was primarily attributable to a
decrease in our finished products inventories, in order to align with decreased
sales volumes across all segments, and changes to our last-in, first-out
inventory reserve balances. These decreases were partially offset by an increase
in our raw materials inventories, driven by the strategic acquisition of ore in
our Titanium Technologies segment.
Our prepaid expenses and other assets were largely unchanged at
Current Liabilities The following table sets forth the components of our current liabilities atDecember 31, 2019 and 2018. December 31, (Dollars in millions) 2019 2018 Accounts payable$ 923 $ 1,137 Short-term and current maturities of long-term debt 134 13 Other accrued liabilities 484 559 Total current liabilities$ 1,541 $ 1,709 Our accounts payable decreased by$214 million (or 19%) to$923 million atDecember 31, 2019 , compared with accounts payable of$1.1 billion atDecember 31, 2018 . The decrease in our accounts payable atDecember 31, 2019 was primarily attributable to our decline in net sales volumes during the year endedDecember 31, 2019 , as well as the timing of our inventory purchases in the fourth quarter of 2018. Our short-term and current maturities of long-term debt increased by$121 million (or greater than 100%) to$134 million atDecember 31, 2019 , compared with short-term and current maturities of long-term debt of$13 million atDecember 31, 2018 . The increase in our short-term and current maturities of long-term debt atDecember 31, 2019 was primarily attributable to$110 million net borrowings under the Securitization Facility,$6 million for financed insurance premiums, and$5 million for the current portion of finance lease liabilities and financing obligations. Our other accrued liabilities decreased by$75 million (or 13%) to$484 million atDecember 31, 2019 , compared with other accrued liabilities of$559 million atDecember 31, 2018 . The decrease in our other accrued liabilities atDecember 31, 2019 was primarily attributable to lower accrued compensation and employee-related costs, payments of certain accrued expenses, and changes in the expected timing of payments related to accrued environmental costs. These decreases were partially offset by balance sheet recognition of our operating lease liabilities upon the adoption of the new leasing standard onJanuary 1, 2019 . As ofDecember 31, 2019 , the current portion of our operating lease liabilities amounted to$66 million . Credit Facilities and Notes
See "Note 20 - Debt" to the Consolidated Financial Statements for a summary of our debt arrangements.
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The Chemours Company Supplier Financing We maintain global paying services agreements with several financial institutions. Under these agreements, the financial institutions act as our paying agents with respect to accounts payable due to our suppliers who elect to participate in the program. The agreements allow our suppliers to sell their receivables to one of the participating financial institutions at the discretion of both parties on terms that are negotiated between the supplier and the respective financial institution. Our obligations to our suppliers, including the amounts due and scheduled payment dates, are not impacted by our suppliers' decisions to sell their receivables under this program. AtDecember 31, 2019 and 2018, the total payment instructions from us amounted to$106 million and$210 million , respectively. Pursuant to their agreement with one of the financial institutions, certain suppliers may elect to be paid early at their discretion. The available capacity under these programs can vary based on the number of investors and/or financial institutions participating in these programs at any point in time. Capital Expenditures
Our operations are capital intensive, requiring ongoing investment to upgrade or enhance existing operations and to meet environmental and operational regulations. Our capital requirements have consisted, and are expected to continue to consist, primarily of:
• ongoing capital expenditures, such as those required to maintain equipment
reliability, the integrity and safety of our manufacturing sites, and to
comply with environmental regulations;
• investments in our existing facilities to help support the introduction of
new products and de-bottleneck to expand capacity and grow our business;
and,
• investments in projects to reduce future operating costs and enhance
productivity.
The following table sets forth our ongoing and expansion capital expenditures,
including environmental capital expenditures, for the years ended December 31,
2019 and 2018.
Year Ended December 31,
(Dollars in millions) 2019 2018
Fluoroproducts $ 201 $ 274
Chemical Solutions 40 75
Titanium Technologies 121 91
Corporate and Other (1) 119 58
Total purchases of property, plant, and equipment
498
(1) Includes
2019 and 2018, respectively, related to our capital expenditures for our
new R&D facility on the Science, Technology, and
of the
Hub").
Our capital expenditures decreased by $17 million (or 3%) to $481 million for
the year ended December 31, 2019 , compared with capital expenditures of $498
million for the same period in 2018. Our capital expenditures for the year ended
December 31, 2019 included the continued construction and completion of our new
R&D facility on the Science, Technology, and Advanced Research campus of the
University of Delaware in Newark, Delaware , as well as preparation of a new
minerals sands mine site in Jesup, Georgia . We also invested in a thermal
oxidizer to reduce aerial PFAS emissions from Fayetteville , which is further
discussed in "Note 22 - Commitments and Contingent Liabilities" to the
Consolidated Financial Statements. These increases are more than offset by
capital expenditures for the year ended December 31, 2018 that did not recur,
whether to the same magnitude or at all, in 2019. Such expenditures included the
completion of our OpteonTM refrigerants plant in Corpus Christi, Texas , as well
as progress on our planned Mining Solutions plant in Mexico prior to its
construction suspension, which is further discussed in "Note 22 - Commitments
and Contingent Liabilities" to the Consolidated Financial Statements.
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The Chemours Company Contractual Obligations
The following table sets forth information related to our significant
contractual obligations at
Payments Due In
2025 and
(Dollars in millions) Total 2020 2021 - 2022 2023 - 2024 Beyond
Long-term debt obligations
(1) $ 4,036 $ 122 $ 26 $ 934 $ 2,954
Interest on long-term debt
obligations (1) 1,046 203 401 309 133
Operating leases 379 82 115 64 118
Financing leases 76 9 16 16 35
Purchase obligations (2):
Raw materials 1,290 160 303 257 570
Utilities 1,055 113 162 153 627
Other 107 64 30 13 -
Total purchase obligations 2,452 337 495 423 1,197
Other liabilities:
Workers' compensation (3) 24 3 5 4 12
Asset retirement obligations
(3) 61 7 21 11 22
Environmental remediation (3) 406 74 111 86 135
Legal settlements (3) 20 4 6 5 5
Employee separation charges 15 15 - - -
Other (3) 170 27 18 21 104
Total other liabilities 696 130 161 127 278
Total contractual obligations
(1) To calculate payments due for principal and interest, we assumed that
interest rates, foreign currency exchange rates, and outstanding borrowings
under our credit facilities were unchanged from
their dates of maturity.
(2) Represents enforceable and legally-binding agreements to purchase goods
and/or services that specify fixed or minimum quantities, fixed minimum or
variable price provisions, and the approximate timing of the agreement.
(3) Represents reasonable estimates of future cash payments for our contractual
obligations.
Off Balance Sheet Arrangements
Historically, we have not made significant payments to satisfy guarantee obligations; however, we believe we have the financial resources to satisfy these guarantees in the event required.
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The Chemours Company Recent Accounting Pronouncements
See "Note 3 - Summary of Significant Accounting Policies" to the Consolidated Financial Statements for a summary of our recent accounting pronouncements.
Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in "Note 3 - Summary of Significant Accounting Policies" to the Consolidated Financial Statements. Management believes that the application of these policies on a consistent basis enables us to provide the users of our financial statements with useful and reliable information about our operating results and financial condition. The preparation of our consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts, including, but not limited to, receivable and inventory valuations, impairment of tangible and intangible assets, long-term employee benefit obligations, income taxes, restructuring liabilities, environmental matters, and litigation. Management's estimates are based on historical experience, facts, and circumstances available at the time, and various other assumptions that are believed to be reasonable. We review these matters and reflect changes in estimates as appropriate. Management believes that the following represents some of the more critical judgment areas in the application of our accounting policies, which could have a material effect on our financial position, results of operations, or cash flows.
Provision for (Benefit from) Income Taxes
The provision for (benefit from) income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for (benefit from) income taxes represents income taxes paid or payable for the current year, plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and tax bases of our assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more-likely-than-not that a tax benefit will not be realized. In evaluating the ability to realize deferred tax assets, we rely on, in order of increasing subjectivity, taxable income in prior carryback years, the future reversals of existing taxable temporary differences, tax planning strategies, and forecasted taxable income using historical and projected future operating results. The breadth of our operations and the global complexity of tax regulations require assessments of uncertainties and judgments in estimating the taxes that we will ultimately pay. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions, outcomes of tax litigation, and resolutions of disputes arising from federal, state, and international tax audits in the normal course of business. A liability for unrecognized tax benefits is recorded when management concludes that the likelihood of sustaining such positions upon examination by taxing authorities is less than more-likely-than-not. It is our policy to include accrued interest related to unrecognized tax benefits in other income (expense), net and income tax-related penalties in the provision for (benefit from) income taxes. With respect toU.S. tax reform, while we have completed our analysis within the applicable measurement period, pursuant to Staff Accounting Bulletin No. 118 as issued by theSEC , we account for the tax impacts of new provisions based on interpretation of existing statutory law, including proposed regulations issued by theU.S. Treasury and theIRS . While there can be no assurances as to the effect of any final regulations on our provision for (benefit from) income taxes, we will continue to evaluate the impacts as any issued regulations become final and adjust our estimates, as appropriate.
See "Note 9 - Income Taxes" to the Consolidated Financial Statements for further information related to our income tax positions.
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The Chemours Company Long-lived Assets We evaluate the carrying value of our long-lived assets to be held and used when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. For the purposes of recognition or measurement of an impairment charge, the assessment is performed on the asset or asset group at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. To determine the level at which the assessment is performed, we consider factors such as revenue dependency, shared costs, and the extent of vertical integration. The carrying value of a long-lived asset is considered impaired when the total projected undiscounted cash flows from the use and eventual disposition of the asset or asset group are separately identifiable and are less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. The fair value methodology used is an estimate of fair market value, which is made based on prices of similar assets or other valuation methodologies, including present value techniques. Long-lived assets to be disposed of other than by sale are classified as held for use until their disposal. Long-lived assets to be disposed of by sale are classified as held for sale and are reported at the lower of their carrying amount or fair market value, less the estimated costs to sell. Depreciation is discontinued for any long-lived assets classified as held for sale. The testing for potential impairment of these assets is significantly dependent on numerous assumptions and reflects management's best estimates at a particular point in time. The dynamic economic environments in which our segments operate, and key economic and business assumptions with respect to projected selling prices, market growth, and inflation rates, can significantly impact the outcome of our impairment tests. Estimates based on these assumptions may differ significantly from actual results. Changes in the factors and assumptions used in assessing potential impairments can have a significant impact on the existence and magnitude of impairments, as well as the time in which such impairments are recognized. In addition, we continually review our diverse portfolio of assets to ensure that they are achieving their greatest potential and are aligned with our growth strategy. Strategic decisions involving a particular group of assets may trigger an assessment of the recoverability of the related assets. Such an assessment could result in impairment losses.
No impairment charges were recognized on our long-lived assets during the years
ended
Goodwill The excess of the purchase price over the estimated fair value of the net assets acquired in a business combination, including any identified intangible assets, is recorded as goodwill. We test our goodwill for impairment at least annually onOctober 1 ; however, these tests are performed more frequently when events or changes in circumstances indicate that the asset may be impaired.Goodwill is evaluated for impairment at the reporting unit level, which is defined as an operating segment, or one level below an operating segment. A reporting unit is the level at which discrete financial information is available and reviewed by business management on a regular basis. An impairment exists when the carrying value of a reporting unit exceeds its fair value. The amount of impairment loss recognized in the consolidated statements of operations is equal to the excess of a reporting unit's carrying value over its fair value, which is limited to the total amount of goodwill allocated to the reporting unit. The fair values of our reporting units were determined by using a combination of income-based and/or market-based valuation techniques. These valuation models incorporated a number of assumptions and judgments surrounding general market and economic conditions, short and long-term revenue growth rates, gross margins and prospective financial information surrounding future reporting unit cash flows. Projections are based on internal forecasts of future business performance and are based on growth assumptions which exclude business growth opportunities not yet fully realized. Discount rate and market multiple assumptions were determined based on relevant peer companies in the chemicals sector. As ofOctober 1, 2019 , we performed our annual goodwill impairment tests for all reporting units. Based upon the results of our annual goodwill impairment tests, no adjustments to the carrying value of goodwill were necessary during the year endedDecember 31, 2019 . The estimated fair value of the Fluoropolymers reporting unit was determined by utilizing a discount rate of 9.84% and a market multiple of 7.3 times Adjusted EBITDA, resulting in an estimated fair value 30% higher than its carrying value. Fluoropolymers has$56 million of goodwill. Changing the weighting of the market and income approaches used for Fluoropolymers could result in a maximum reduction of the excess of estimated fair value over carrying value to 17%. Assuming all other factors remain the same, a 200-basis point increase in the discount rate would decrease the excess of estimated fair value over carrying value to 17%; a 1% decrease in the long-term growth rate would decrease the excess of estimated fair value over carrying value to 24%; and, a 15% decrease in the market multiple assumption would decrease the excess of estimated fair value over carrying value to 20%. Under each of these sensitivity scenarios, the Fluoropolymers reporting unit's fair value exceeded its carrying value. The estimated fair value of the Mining Solutions reporting unit was determined by utilizing a discount rate of 11.09%, resulting in an estimated fair value 17% higher than its carrying value. Mining Solutions has$51 million of goodwill. Assuming all other factors remain the same, it would take more than a 110-basis point increase in the discount rate to cause the estimated fair value to fall below the unit's carrying value; and, a 1% decrease in the long-term growth rate would decrease the excess of estimated fair value over carrying value to 5%. 48
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The Chemours Company
Our determination of the fair value of the Mining Solutions reporting unit
considered further delays and additional costs of construction for our new
Mining Solutions facility under construction in Gomez Palacio, Durango, Mexico .
The construction-in-process for this facility represents a significant portion
of the total carrying value of Mining Solutions, and, in the event that the
facility was unable to be completed, the impairment of the related long-lived
assets would significantly decrease the carrying value of the reporting unit. As
a result, an impairment of the reporting unit's goodwill would become less
likely.
Employee Benefits
The amounts recognized in our consolidated financial statements related to
pension and other long-term employee benefits plans are determined from
actuarial valuations. Inherent in these valuations are assumptions including,
but not limited to, the expected returns on plan assets, discount rates at which
liabilities are expected to be settled, rates of increase in future compensation
levels, and mortality rates. These assumptions are updated annually and are
disclosed in "Note 27 - Long-term Employee Benefits" to the Consolidated
Financial Statements. In accordance with GAAP, actual results that differed from
the assumptions are accumulated and amortized over future periods and therefore,
affect expense recognized and obligations recorded in future periods.
We use discount rates that are developed by matching the expected cash flows of
each benefit plan to various yield curves constructed from a portfolio of
high-quality, fixed income instruments provided by the plan's actuary as of the
measurement date. As of December 31, 2019 , the weighted-average discount rate
was 1.4%.
The expected long-term rates of return on plan assets are determined by
performing a detailed analysis of historical and expected returns based on the
strategic asset allocation of the underlying asset class applicable to each
country. We also consider our historical experience with the pension funds'
asset performance. The expected long-term rates of return on plan assets are
assumptions and not what is expected to be earned in any one particular year.
The weighted-average long-term rates of return on plan assets assumptions used
for determining our net periodic pension expense for 2019 was 4.1%.
A 50 basis point increase in the discount rate would result in a decrease of $4
million to the net periodic benefit cost for 2020, while a 50 basis point
decrease in the discount rate would result in an increase of approximately $5
million . A 50 basis point increase in the expected return on plan assets
assumption would result in a decrease of approximately $3 million to the net
periodic benefit cost for 2020, while a 50 basis point decrease in the expected
return on plan assets assumption would result in an increase of approximately $3
million .
In the fourth quarter of 2019, we, through our wholly-owned subsidiary Chemours
Netherlands B.V ., completed a settlement transaction related to a significant
portion of our Netherlands pension plan. We transferred the future risk and
administration associated with the $932 million of inactive participants' vested
pension benefits to a third-party asset management company in the Netherlands .
The irrevocability of the transaction was contingent upon non-objection by the
Dutch National Bank , which was received in October 2019 . Following the receipt
of non-objection, the responsibility for the associated pension obligation was
transferred to the third-party asset management company in December 2019 ,
thereby eliminating our exposure to the pension liabilities and formally
effecting the settlement. At the time of settlement, a remeasurement of plan
assets and projected benefit obligations was performed, resulting in a $158
million decrease to net pension assets and increase to accumulated other
comprehensive loss on the consolidated balance sheet. The cumulative loss
associated with the inactive participants' vested pension benefits was then
immediately reclassified from accumulated other comprehensive loss and
recognized in earnings, resulting in a charge of $380 million recognized in
other expense, net in the consolidated statements of operations. At December 31,
2019 , the projected benefit obligations associated with the plan's active
employees remained on our consolidated balance sheet.
Litigation
We accrue for litigation matters when it is probable that a liability has been
incurred and the amount of the liability can be reasonably estimated. Litigation
liabilities and expenditures included in our consolidated financial statements
include litigation matters that are liabilities of DuPont and its subsidiaries,
which we may be required to indemnify pursuant to the Separation-related
agreements executed prior to the Separation. Disputes between us and DuPont may
arise with respect to indemnification of these matters, including disputes based
on matters of law or contract interpretation. If, and to the extent these
disputes arise, they could materially adversely affect our results of
operations. Legal costs such as outside counsel fees and expenses are charged to
expense in the period services are received.
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The Chemours Company Environmental Liabilities and Expenditures
We accrue for environmental remediation costs when it is probable that a liability has been incurred and a reasonable estimate of the liability can be made. Where the available information is sufficient to estimate the amount of liability, that estimate has been used. Where the information is only sufficient to establish a range of probable liability, and no point within the range is more likely than any other, the lower end of the range has been used. Estimated liabilities are determined based on existing remediation laws and technologies and our planned remedial responses, which are derived from in-depth environmental studies, sampling, testing, and other analyses. Inherent uncertainties exist in such evaluations, primarily due to unknown environmental conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation technologies. These accruals are adjusted periodically as remediation efforts progress and as additional technology, regulatory, and legal information become available. Environmental liabilities and expenditures include claims for matters that are liabilities of DuPont and its subsidiaries, which we may be required to indemnify pursuant to the Separation-related agreements executed prior to the Separation. Accrued liabilities are undiscounted and do not include claims against third parties. Costs related to environmental remediation are charged to expense in the period that the associated liability is accrued. Other environmental costs are also charged to expense in the period incurred, unless they increase the value of the property or reduce or prevent contamination from future operations, in which case, they are capitalized and amortized. Environmental Matters Consistent with our values and our Environment, Health, Safety, and Corporate Responsibility policy, we are committed to preventing releases to the environment at our manufacturing sites to keep our people and communities safe, and to be good stewards of the environment. We are also subject to environmental laws and regulations relating to the protection of the environment. We believe that, as a general matter, our policies, standards, and procedures are properly designed to prevent unreasonable risk of harm to people and the environment, and that our handling, manufacture, use, and disposal of hazardous substances are in accordance with applicable environmental laws and regulations. Environmental Expenditures We incur costs for pollution abatement activities including waste collection and disposal, installation and maintenance of air pollution controls and waste water treatment, emissions testing and monitoring, and obtaining permits. Annual expenses charged to current operations include environmental operating costs and increases in remediation accruals (further described below), if any, during the period reported. The charges described in this section include$201 million accrued for costs associated with the proposed Consent Order between us and the NC DEQ, which is further described in "Note 22 - Commitments and Contingent Liabilities" to the Consolidated Financial Statements. These accrued liabilities represent on-site remediation, off-site groundwater remediation, and toxicology studies related toFayetteville . Our environmental remediation expenditures are subject to considerable uncertainty and may fluctuate significantly. In theU.S. , additional capital expenditures associated with ongoing operations (further described below) are expected to be required over the next decade for treatment, storage, and disposal facilities for solid and hazardous waste and for compliance with the Clean Air Act ("CAA"). Until all CAA regulatory requirements are established and known, considerable uncertainty will remain regarding estimates for our future capital and remediation expenditures.
Environmental Capital Expenditures
For the years endedDecember 31, 2019 , 2018, and 2017, we spent$101 million ,$57 million , and$15 million , respectively, on environmental capital projects that were either required by law or necessary to meet our internal environmental objectives. The increases in our environmental capital expenditures for the years endedDecember 31, 2019 and 2018 when compared with the same period in 2017 were primarily attributable to new capital projects atFayetteville . We expect further increases in these capital expenditures over the near-term, while in the longer-term, our capital expenditures for environmental matters will vary based on the success of our deployed solutions, changes in our operations, technological advancements, developments in environmental requirements, and stakeholder expectations. 50
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The Chemours Company Environmental Remediation In large part, because of past operations, operations of predecessor companies, or past disposal practices, we, like many other similar companies, have clean-up responsibilities and associated remediation costs, and are subject to claims by other parties, including claims for matters that are liabilities of DuPont and its subsidiaries that we may be required to indemnify pursuant to the separation-related agreements executed prior to the Separation. We accrue for clean-up activities consistent with the policy described under "Critical Accounting Policies and Estimates" within this MD&A and in "Note 3 - Summary of Significant Accounting Policies" to the Consolidated Financial Statements. Our environmental liabilities include estimated costs, including certain accruable costs associated with on-site capital projects, related to a number of sites for which it is probable that environmental remediation will be required, whether or not subject to enforcement activities, as well as those obligations that result from environmental laws such as the CERCLA, RCRA, and similar federal, state, local, and foreign laws. These laws require certain investigative, remediation, and restoration activities at sites where we conduct or once conducted operations or at sites where our generated waste was disposed. AtDecember 31, 2019 and 2018, our consolidated balance sheets included environmental remediation liabilities of$406 million and$291 million , respectively, relating to these matters, which, as discussed in further detail below, included$201 million and$75 million , respectively, forFayetteville .
The following table sets forth the activities in our remediation accruals for
the years ended
December 31,
(Dollars in millions) 2019 2018
Balance at January 1, $ 291 $ 253
Increase in remediation accrual 200 101
Remediation payments (85 ) (63 )
Balance at December 31, $ 406 $ 291 Our estimated liability for environmental remediation covered 211 sites at
The following table sets forth our estimated environmental liability by site category. (Dollars in millions) December 31, 2019 December 31, 2018 Site category Number of Sites Remediation
Accrual Number of Sites Remediation Accrual Chemours-owned (1)
25 $ 327 25 $ 204
Multi-party Superfund/non-owned (2) 86 79 86 87
Closed or settled 100 - 100 -
Total sites 211 $ 406 211 $ 291
(1) Includes remediation accrual of divested or sold sites where certain
environmental obligations were retained by us in accordance with the
related sale agreements.
(2) Sites not owned by us, including sites previously owned by DuPont and sites
owned by a third party, where remediation obligations are imposed by
Superfund laws such as CERCLA or similar state laws.
As part of our legacy as a former subsidiary of DuPont, we are cleaning-up
historical impacts to soil and groundwater that have occurred in the past at the
25 sites that we own. These operating and former operating sites make up
approximately 80% of our remediation liabilities at
We were also assigned numerous clean-up obligations from DuPont, which pertain to 86 sites previously owned by DuPont and sites that we or DuPont never owned or operated. We are meeting our obligations to clean up those sites. The majority of these never-owned sites are multi-party Superfund sites that we, through DuPont, have been notified of potential liability under CERCLA or similar state laws and which, in some cases, may represent a small fraction of the total waste that was allegedly disposed of at a site. These sites represent approximately 20% of our remediation liabilities atDecember 31, 2019 . Included in the 86 sites are 36 inactive sites for which there has been no known investigation, clean-up, or monitoring activity, and no remediation obligation is imposed or required; as such, no remediation liabilities are recorded. The remaining 100 sites, which are Superfund sites and other sites not owned by us, are either already closed or settled, or sites for which we do not believe we have clean-up responsibility based on current information.
With the exception of
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The Chemours Company
The following graph sets forth the number of remediation sites by site clean-up
phase and our remediation liabilities by site clean-up phase as of December 31,
2019 and 2018.
[[Image Removed]]
(1) Number of sites does not include the 36 inactive sites for which there has
been no known investigation, clean-up, or monitoring activities as of
December 31, 2019 and 2018.
(2) Dollars in millions.
(3) As of
million for off-site groundwater remediation. As of December 31, 2018 ,
Investigation included $75 million related to Fayetteville .
As remediation efforts progress, sites move from the investigation phase
("Investigation") to the active clean-up phase ("Active Remediation"), and as
construction is completed at Active Remediation sites, those sites move to the
operation, maintenance, and monitoring ("OM&M"), or closure phase. As final
clean-up activities for some significant sites are completed over the next
several years, we expect our annual expenses related to these active sites to
decline over time. The time frame for a site to go through all phases of
remediation (Investigation and Active Remediation) may take about 15 to
20 years, followed by several years of OM&M activities. Remediation activities,
including OM&M activities, vary substantially in duration and cost from site to
site. These activities, and their associated costs, depend on the mix of unique
site characteristics, evolving remediation technologies, and diverse regulatory
requirements, as well as the presence or absence of other Potentially
Responsible Parties ("PRPs"). In addition, for claims that we may be required to
indemnify DuPont pursuant to the separation-related agreements, we and DuPont
may have limited available information for certain sites or are in the early
stages of discussions with regulators. For these sites, there may be
considerable variability between the clean-up activities that are currently
being undertaken or planned and the ultimate actions that could be required.
Therefore, considerable uncertainty exists with respect to environmental
remediation costs, and, under adverse changes in circumstances, although deemed
remote, the potential liability may range up to approximately $530 million above
the amount accrued at December 31, 2019 . In general, uncertainty is greatest and
the range of potential liability is widest in the Investigation phase, narrowing
over time as regulatory agencies approve site remedial plans. As a result,
uncertainty is reduced, and sites ultimately move into OM&M, as needed. As more
sites advance from Investigation to Active Remediation to OM&M or closure, the
upper end of the range of potential liability is expected to decrease over time.
Some remediation sites will achieve site closure and will require no further
action to protect people and the environment and comply with laws and
regulations. At certain sites, we expect that there will continue to be some
level of remediation activity due to ongoing OM&M of remedial systems. In
addition, portfolio changes, such as an acquisition or divestiture, or
notification as a PRP for a multi-party Superfund site, could result in
additional remediation activity and potentially additional accrual.
Management does not believe that any loss, in excess of amounts accrued, related
to remediation activities at any individual site will have a material impact on
our financial position or cash flows for any given year, as such obligation can
be satisfied or settled over many years.
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The Chemours Company Significant Environmental Remediation Sites
While there are many remediation sites that contribute to our total accrued
environmental remediation liabilities at
December 31,
(Dollars in millions) 2019 2018
Chambers Works, Deepwater, New Jersey $ 20 $ 18
East Chicago, Indiana 17 21
Fayetteville Works,
43 45
USS Lead, East Chicago, Indiana 13 15
All other sites 112 117
Total accrued environmental remediation $ 406 $ 291
The five sites listed above represent 72% and 60% of our total accrued
environmental remediation liabilities at December 31, 2019 and 2018,
respectively. For these five sites, we expect to spend, in the aggregate, $115
million over the next three years. For all other sites, we expect to spend $68
million over the next three years.
Chambers Works,
The Chambers Works complex is located on the eastern shore of theDelaware River inDeepwater ,Salem County, New Jersey . The site comprises the former Carneys Point Works in the northern area and the Chambers Works manufacturing area in the southern area. Site operations began in 1892 when the formerCarneys Point smokeless gunpowder plant was constructed at the northern end ofCarneys Point . Site operations began in the manufacturing area around 1914 and included the manufacture of dyes, aromatics, elastomers, chlorofluorocarbons, and tetraethyl lead. We continue to manufacture a variety of fluorochemicals and finished products at Chambers Works. In addition, three tenants operate processes at Chambers Works including steam/electricity generation, industrial gas production, and the manufacture of intermediate chemicals. As a result of over 100 years of continuous industrial activity, site soils and groundwater have been impacted by chemical releases. In response to identified groundwater contamination, a groundwater interceptor well system ("IWS") was installed in 1970, which was designed to contain contaminated groundwater and restrict off-site migration. Additional remediation is being completed under a federal RCRA Corrective Action permit. The site has been studied extensively over the years, and more than 25 remedial actions have been completed to date and engineering and institutional controls put in place to ensure protection of people and the environment. In the fourth quarter of 2017, a site perimeter sheet pile barrier intended to more efficiently contain groundwater was completed. Remaining work beyond continued operation of the IWS and groundwater monitoring includes completion of various targeted studies on site and in adjacent water bodies to close investigation data gaps, as well as selection and implementation of final remedies under RCRA Corrective Action for various solid waste management units and areas of concern not yet addressed through interim measures.East Chicago, Indiana East Chicago is a former manufacturing facility that we previously owned inEast Chicago ,Lake County, Indiana . The approximate 440-acre site is bounded to the south by the east branch of theGrand Calumet River , to the east and north by residential and commercial areas, and to the west by industrial areas, including a former lead processing facility. The inorganic chemicals unit on site produced various chloride, ammonia, and zinc products and inorganic agricultural chemicals beginning in 1892 until 1986. Organic chemical manufacturing began in 1944, consisting primarily of chlorofluorocarbons production. The remaining business was sold to W.R. Grace Company ("Grace") in early 2000. Approximately 172 acres of the site were never developed and are managed byThe Nature Conservancy for habitat preservation. A comprehensive evaluation of soil and groundwater conditions at the site was performed as part of the RCRA Corrective Action process. Studies of historical site impacts began in 1983 in response to preliminary CERCLA actions undertaken by theU.S. Environmental Protection Agency ("EPA "). TheEPA eventually issued an Administrative Order on Consent for the site in 1997. The order specified that remediation work be performed under RCRA Corrective Action authority. Work has proceeded under the RCRA Corrective Action process since that time. 53 --------------------------------------------------------------------------------The Chemours Company Subsequent investigations included the preparation of initial environmental site assessments and multiple phases of investigation. In 2002, as an interim remedial measure, two 2,000-foot long permeable reactive barrier treatment walls were installed along the northern property boundary to address migration of chemicals in groundwater. Since that time, the investigation process has been completed and approved by theEPA , and the final remedy for the site was issued by theEPA inJuly 2018 . OnJune 29, 2018 , we sold theEast Chicago, Indiana site to a third party for$1 million . In connection with the sale, the buyer agreed to assume all costs associated with environmental remediation activities at the site in excess of$21 million , which will remain our responsibility. At the time of the sale, we had accrued the full$21 million , of which$17 million remained as ofDecember 31, 2019 . We will reimburse the buyer through a series of progress payments to be made at defined intervals as certain tasks are completed.
Fayetteville Works,
Fayetteville is located southeast of theCity of Fayetteville inCumberland andBladen counties,North Carolina . The facility encompasses approximately 2,200 acres, which were purchased by DuPont in 1970, and are bounded to the east by theCape Fear River and to the west byNorth Carolina Highway 87 . Currently, the site manufactures plastic sheeting, fluorochemicals, and intermediates for plastics manufacturing. A former manufacturing area, which was sold in 1992, produced nylon strapping and elastomeric tape. DuPont sold its Butacite® and SentryGlas® manufacturing units toKuraray America, Inc. inSeptember 2014 . InJuly 2015 , upon our separation from DuPont, we became the owner of theFayetteville land assets along with fluoromonomers, Nafion® membranes, and the related polymer processing aid manufacturing units. A polyvinyl fluoride resin manufacturing unit remained with DuPont. Beginning in 1996, several stages of site investigation were conducted under NC DEQ oversight, as required by the facility's hazardous waste permit. In addition, the site has voluntarily agreed to agency requests for additional investigations of the potential release of "PFAS" (perfluoroalkyl and polyfluoroalkyl substances) beginning with "PFOA" (collectively, perfluorooctanoic acids and its salts, including the ammonium salt) in 2006. As a result of detection of the polymerization processing aid hexafluoropropylene oxide dimer acid ("HFPO Dimer Acid," sometimes referred to as "GenX" or "C3 Dimer Acid") in on-site groundwater wells during our investigations in 2017, the NC DEQ issued a Notice of Violation ("NOV") onSeptember 6, 2017 alleging violations ofNorth Carolina water quality statutes and requiring further response. Since that time, and in response to three additional NOVs issued by NC DEQ and pursuant to the Consent Order (as discussed below), we have worked cooperatively with the agency to investigate and address releases of PFAS to on-site and off-site groundwater and surface water. As discussed in "Note 22 - Commitments and Contingent Liabilities" to the Consolidated Financial Statements, as well as "Recent Developments" within this MD&A, we and the NC DEQ have filed a final Consent Order that comprehensively addressed various issues, NOVs, and court filings made by the NC DEQ regardingFayetteville and resolved litigations filed by the NC DEQ andCape Fear River Watch , a non-profit organization. In connection with the Consent Order, a thermal oxidizer became fully operational at the site inDecember 2019 to reduce aerial PFAS emissions fromFayetteville . In the fourth quarter of 2019, we completed and submitted ourCape Fear River PFAS Loading Reduction Plan - Supplemental Information Report and CAP to NC DEQ. The Supplemental Information Report provides information to support the evaluation of potential remedial options to reduce PFAS loadings to surface waters, including interim alternatives. The CAP describes potential remediation activities to address PFAS in on-site groundwater and surface waters at the site, in accordance with the requirements of the Consent Order and theNorth Carolina groundwater standards, and builds on the previous submissions to NC DEQ. The NC DEQ has made the CAP available for public review and comment untilMarch 6, 2020 . In the fourth quarter of 2019, based on the Consent Order, CAP, and our plans, we accrued an additional$132 million related to the estimated cost of on-site remediation.Pompton Lakes, New Jersey During the 20th century, blasting caps, fuses, and related materials were manufactured atPompton Lakes ,Passaic County, New Jersey . Operating activities at the site were ceased in the mid-1990s. The primary contaminants in the soil and sediments are lead and mercury. Groundwater contaminants include volatile organic compounds. Under the authority of theEPA and theNew Jersey Department of Environmental Protection ("NJ DEP"), remedial actions at the site are focused on investigating and cleaning-up the area. Groundwater monitoring at the site is ongoing, and we have installed and continue to install vapor mitigation systems at residences within the groundwater plume. In addition, we are further assessing groundwater conditions. InSeptember 2015 , theEPA issued a modification to the site's RCRA permit that requires us to dredge mercury contamination from a 36-acre area of the lake and remove sediment from two other areas of the lake near the shoreline. The remediation activities commenced when permits and implementation plans were approved inMay 2016 , and work on the lake dredging project is now complete. InApril 2019 , Chemours submitted a revised Corrective Measures Study ("CMS") proposing actions to address on-site soils impacted from past operations that exceed applicable clean-up criteria. That CMS is currently under review byEPA and NJ DEP. 54 --------------------------------------------------------------------------------The Chemours Company
The U.S. Smelter andLead Refinery, Inc. ("USS Lead") Superfund site is located in the Calumet neighborhood ofEast Chicago ,Lake County, Indiana . The site includes the former USS Lead facility along with nearby commercial, municipal, and residential areas. The primary compounds of interest are lead and arsenic which may be found in soils within the impacted area. TheEPA is directing and organizing remediation on this site, and we are one of a number of parties working cooperatively with theEPA on the safe and timely completion of this work. DuPont's formerEast Chicago manufacturing facility was located adjacent to the site, and DuPont assigned responsibility for the site to us in the separation agreement. The USS Lead Superfund site was listed on the National Priorities List in 2009. To facilitate negotiations with PRPs, theEPA divided the residential part of the USS Lead Superfund site into three zones, referred to as Zone 1, Zone 2, and Zone 3. The division into three zones resulted inAtlantic Richfield Co. ("Atlantic Richfield") and DuPont entering into an agreement in 2014 with theEPA and theState of Indiana to reimburse theEPA 's costs to implement clean-up in Zone 1 and Zone 3. More recently, inMarch 2017 , we and three other parties -Atlantic Richfield , DuPont, and theU.S. Metals Refining Co. ("US Metals") - entered into an administrative order on consent to reimburse theEPA 's costs to clean-up a portion of Zone 2. InMarch 2018 , theEPA issued a Unilateral Administrative Order for the remainder of the Zone 2 work to five parties, including us,Atlantic Richfield , DuPont,U.S. Metals , andUSS Lead Muller Group , and these parties entered into an interim allocation agreement to perform that work. As of the end of 2019, the required work in Zone 3 has been completed, and Zone 2 is nearly complete. There is uncertainty as to whether these parties will be able to agree on a final allocation for Zone 2 and/or the other Zones, and whether any additional PRPs may be identified. The environmental accrual for USS Lead continues to include completion of the remaining obligations under the 2012 Record of Decision ("ROD") and Statement of Work, which principally encompasses completion of Zone 1. TheEPA released a proposed amendment to the 2012 ROD for a portion of Zone 1 inDecember 2018 (following itsAugust 2018 Feasibility Study Addendum), with its recommended option based on future residential use. However, the proposed amendment was sent out for public comment with theEPA 's statement that the remedy basis and cost may change based on community input on future land use. TheEPA 's final decision was expected in 2019, but has not yet been released. We expect that our future costs for Zone 1 will be contingent on this remedy decision, as well as any final allocation between PRPs.
InMarch 2019 , the NJ DEP issued two Directives and filed four lawsuits against Chemours and other defendants. Further discussion related to these matters is included in "Note 22 - Commitments and Contingent Liabilities" to the Consolidated Financial Statements. Climate Change In 2018, we issued our inaugural Corporate Responsibility Commitment ("CRC") Report, which expresses our corporate responsibility commitment - an extension of our growth strategy - as 10 ambitious goals targeted for completion by 2030. Built on the pillars of Inspired People, Shared Planet, and an Evolved Portfolio, our Shared Planet pillar underlines our commitment to deliver essential solutions responsibly, without causing harm to the Earth. With a focus on the responsible treatment of climate, water, and waste, our Shared Planet goals are comprised of the following: • Reduce greenhouse gas ("GHG") emissions intensity by 60%; • Advance our plan to become carbon positive by 2050;
• Reduce air and water process emissions of fluorinated organic chemicals by
99% or more; and,
• Reduce our landfill volume intensity by 70%.
We are committed to improving our resource efficiency, to acting on
opportunities to reduce our GHG emissions, to enhancing the eco-efficiency of
our supply chain, and to encouraging our employees to reduce their own
environmental footprints. We understand that maintaining safe, sustainable
operations has an impact on us, our communities, the environment, and our
collective future. We continue to invest in R&D to develop safer, cleaner, and
more efficient products and processes that help our customers and consumers
reduce both their GHGs and their overall environmental footprint. We value
collaboration to drive change and commit to working with policymakers, our value
chain, and other organizations to encourage collective action for reducing GHGs.
PFOA
See our discussion under the heading "PFOA" in "Note 22 - Commitments and Contingent Liabilities" to the Consolidated Financial Statements.
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The Chemours Company GenX OnJune 26, 2019 theMember States Committee of theEuropean Chemicals Agency ("ECHA") voted to list HFPO Dimer Acid as a Substance of Very High Concern. The vote was based on Article 57(f) - equivalent level of concern having probable serious effects to the environment. This identification does not impose immediate regulatory restriction or obligations, but may lead to a future authorization or restriction of the substance. OnSeptember 24, 2019 , Chemours filed an application with theEU Court of Justice for the annulment of the decision of ECHA to list HFPO Dimer Acid as a Substance of Very High Concern.
InMay 2019 , we filed a lawsuit inDelaware Chancery Court ("Chancery Court ") against DowDuPont, Inc., Corteva, Inc., and DuPont concerning DuPont's contention that it is entitled to unlimited indemnity from us for specified liabilities that DuPont assigned to us in the spin-off. The lawsuit requests that theChancery Court enter a declaratory judgment limiting DuPont's indemnification rights against us and the transfer of liabilities to us to the actual "high-end (maximum) realistic exposures" it stated in connection with the spin-off, or, in the alternative, requiring the return of the approximate$4 billion dividend DuPont extracted from us in connection with the spin-off. In response, DuPont has filed a Motion to Dismiss the lawsuit seeking to have the dispute heard in a non-public arbitration rather than theChancery Court . Many of the potential litigation liabilities discussed in "Note 22 - Commitments and Contingent Liabilities" to the Consolidated Financial Statements are at issue in the lawsuit. 56
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The Chemours Company Non-GAAP Financial Measures We prepare our consolidated financial statements in accordance with GAAP. To supplement our financial information presented in accordance with GAAP, we provide the following non-GAAP financial measures - Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings per Share ("EPS"), Free Cash Flows ("FCF"), and Return onInvested Capital ("ROIC") - in order to clarify and provide investors with a better understanding of our performance when analyzing changes in our underlying business between reporting periods and provide for greater transparency with respect to supplemental information used by management in its financial and operational decision-making. We utilize Adjusted EBITDA as the primary measure of segment profitability used by our CODM.
Adjusted EBITDA is defined as income (loss) before income taxes, excluding the following:
• interest expense, depreciation, and amortization;
• non-operating pension and other post-retirement employee benefit costs,
which represents the components of net periodic pension (income) costs
excluding the service cost component;
• exchange (gains) losses included in other income (expense), net;
• restructuring, asset-related, and other charges;
• asset impairments;
• (gains) losses on sales of business or assets; and,
• other items not considered indicative of our ongoing operational performance
and expected to occur infrequently.
Adjusted Net Income is defined as our net income or loss, adjusted for items
excluded from Adjusted EBITDA, except interest expense, depreciation,
amortization, and certain provision for (benefit from) income tax amounts.
Adjusted EPS is presented on a diluted basis and is calculated by dividing
Adjusted Net Income by the weighted-average number of our common shares
outstanding, accounting for the dilutive impact of our stock-based compensation
awards. FCF is defined as our cash flows provided by (used for) operating
activities, less purchases of property, plant, and equipment as shown in our
consolidated statements of cash flows. ROIC is defined as Adjusted Earnings
before Interest and Taxes ("EBIT"), divided by the average of our invested
capital, which amounts to net debt plus equity.
We believe the presentation of these non-GAAP financial measures, when used in
conjunction with GAAP financial measures, is a useful financial analysis tool
that can assist investors in assessing our operating performance and underlying
prospects. This analysis should not be considered in isolation or as a
substitute for analysis of our results as reported under GAAP. In the future, we
may incur expenses similar to those eliminated in this presentation. Our
presentation of Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, FCF, and
ROIC should not be construed as an inference that our future results will be
unaffected by unusual or infrequently occurring items. The non-GAAP financial
measures we use may be defined differently from measures with the same or
similar names used by other companies. This analysis, as well as the other
information provided in this Annual Report on Form 10-K, should be read in
conjunction with the Consolidated Financial Statements and notes thereto
included in this report.
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The Chemours Company
The following table sets forth a reconciliation of Adjusted EBITDA, Adjusted Net
Income, and Adjusted EPS to our net income (loss) attributable to Chemours for
the years ended December 31, 2019 and 2018.
Year Ended December 31,
(Dollars in millions, except per share amounts) 2019
2018
Net (loss) income attributable to Chemours $ (52 ) $
995
Non-operating pension and other post-retirement employee benefit cost (income) (1) 368 (27 ) Exchange losses (gains), net 2 (1 ) Restructuring, asset-related, and other charges (2) 87
49
Loss on extinguishment of debt -
38
Gain on sales of assets and businesses (3) (10 ) (45 ) Transaction costs (4) 3
9
Legal and environmental charges (5) 175
82
Other charges -
1
Adjustments made to income taxes (6) - (41 ) Benefit from income taxes relating to reconciling items (7) (154 ) (26 ) Adjusted Net Income 419
1,034
Net income attributable to non-controlling interests - 1 Interest expense, net 208 195 Depreciation and amortization 311 284 All remaining provision for income taxes 82
226
Adjusted EBITDA $ 1,020 $
1,740
Weighted-average number of common shares outstanding - basic 164,816,839
176,968,554
Dilutive effect of our employee compensation plans (8) 2,428,184
5,603,467
Weighted-average number of common shares outstanding - diluted (8) 167,245,023
182,572,021
Per share data Basic (loss) earnings per share of common stock $ (0.32 ) $
5.62
Diluted (loss) earnings per share of common stock (8) (0.32 )
5.45
Adjusted basic earnings per share of common stock 2.54
5.85
Adjusted diluted earnings per share of common stock (8) 2.51
5.67
(1) The year ended
related to a significant portion of our
to the vested pension benefits of the inactive participants. See "Note 27
- Long-term Employee Benefits" to the Consolidated Financial Statements
for further details.
(2) Includes restructuring, asset-related, and other charges, which arediscussed in further detail in "Note 7 - Restructuring, Asset-related, and
Other Charges" to the Consolidated Financial Statements.
(3) The year ended
related to the sale of the Company's Repauno, New Jersey site. The year
ended December 31, 2018 included gains of $3 million and $42 million
associated with the sales of our East Chicago, Indiana and Linden, New
Jersey sites, respectively.
(4) Includes costs associated with our debt transactions, as well as
accounting, legal, and bankers' transaction costs incurred in connection
with our strategic initiatives.
(5) Legal charges pertains to litigation settlements, PFOA drinking water
treatment accruals, and other legal charges. Environmental charges
pertains to estimated liabilities associated with on-site remediation,
off-site groundwater remediation, and toxicology studies related to
Fayetteville . The year ended December 31, 2019 included $168 million in
additional charges for the approved final Consent Order associated with
certain matters at
with
to the Consolidated Financial Statements for further detail.
(6) Includes the removal of certain discrete income tax impacts within our
provision for income taxes, such as the benefit from windfalls on our
share-based payments, historical valuation allowance adjustments,unrealized gains and losses on foreign exchange rate changes, and other
discrete income tax items.
(7) The income tax impacts included in this caption are determined using the
applicable rates in the taxing jurisdictions in which income or expense
occurred and represents both current and deferred income tax expense or
benefit based on the nature of the non-GAAP financial measure.
(8) In periods where the Company incurs a net loss, the impact of potentially
dilutive securities is excluded from the calculation of EPS under GAAP, as
its inclusion would have an anti-dilutive effect. As such, with respect to
the GAAP measure of diluted EPS, the impact of potentially dilutive
securities is excluded from our calculation for the year ended December
31, 2019. With respect to the non-GAAP measure of adjusted diluted EPS,
the impact of potentially dilutive securities is included in our
calculation for both of the periods presented above, as Adjusted Net
Income was in a net income position for the years ended December 31, 2019
and 2018.
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The Chemours Company
The following table sets forth a reconciliation of FCF to our cash flows
provided by operating activities for the years ended December 31, 2019 and 2018.
Year Ended December 31,
(Dollars in millions) 2019 2018
Cash flows provided by operating activities
1,140
Less: Purchases of property, plant, and equipment (481 )
(498 ) Free Cash Flows$ 169 $ 642
The following table sets forth a reconciliation of invested capital, net, a
component of ROIC, to our total debt, equity, and cash and cash equivalents
amounts for the years ended
Year Ended December 31,
(Dollars in millions) 2019 2018
Adjusted EBITDA (1) $ 1,020 $ 1,740
Less: Depreciation and amortization (311 ) (284 )
Adjusted EBIT 709 1,456
Total debt 4,160 3,972
Total equity 695 1,020
Less: Cash and cash equivalents (943 ) (1,201 )
Invested capital, net $ 3,912 $ 3,791
Average invested capital (2) $ 4,102 $ 3,717
Return on Invested Capital 17 % 39 %
(1) See the preceding tables for a reconciliation of Adjusted EBITDA to net
income (loss) attributable to Chemours for the years ended December 31,
2019 and 2018.
(2) Average invested capital is based on a five-quarter trailing average of
invested capital, net.
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The Chemours Company © Edgar Online, source
