THE CHEMOURS COMPANY
This Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") supplements the unaudited Interim 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 periods presented. Unless
the context otherwise requires, references herein to "The Chemours Company ",
"Chemours", "the Company", "our Company", "we", "us", and "our" refer to The
Chemours Company and its consolidated subsidiaries. References herein to
"DuPont" refer to E. I. du Pont de Nemours and Company , which is now a
subsidiary of Corteva, Inc., a Delaware corporation, unless the context
otherwise requires.
This MD&A should be read in conjunction with the unaudited Interim Consolidated
Financial Statements and the related notes thereto included in Item 1 of this
Quarterly Report on Form 10-Q, as well as our audited Consolidated Financial
Statements and the related notes thereto included in our Annual Report on Form
10-K for the year ended December 31, 2019 .
This section and other parts of this Quarterly Report on Form 10-Q contain
forward-looking statements, within the meaning of the federal securities laws,
that involve risks and uncertainties. Forward-looking statements provide current
expectations of future events based on certain assumptions and include any
statement that does not directly relate to any historical or current fact. The
words "believe", "expect", "anticipate", "plan", "estimate", "target",
"project", and similar expressions, among others, generally identify
"forward-looking statements", which speak only as of the date the statements
were made. The matters discussed in these forward-looking statements are subject
to risks, uncertainties, and other factors that could cause actual results to
differ materially from those set forth in the forward-looking statements.
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 in the Forward-looking Statements and the Risk Factors
sections in our Annual Report on Form 10-K for the year ended December 31, 2019 ,
and as otherwise discussed in this report, particularly as it pertains to the
current novel coronavirus disease ("COVID-19"). We assume no obligation to
revise or update any forward-looking statement for any reason, except as
required by law.
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 chemicals 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 titanium dioxide ("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.
We are committed to creating value for our customers and stakeholders through
the reliable delivery of high-quality products and services around the world. To
achieve this goal, we have a global team dedicated to upholding our five core
values: (i) customer centricity - driving customer growth, and our own, by
understanding our customers' needs and building long-lasting relationships with
them; (ii) refreshing simplicity - cutting complexity by investing in what
matters, and getting results faster; (iii) collective entrepreneurship -
empowering our employees to act like they own our business, while embracing the
power of inclusion and teamwork; (iv) safety obsession - living our steadfast
belief that a safe workplace is a profitable workplace; and, (v) unshakable
integrity - doing what's right for our customers, colleagues, and communities -
always.
Additionally, our Corporate Responsibility Commitment focuses on three key
principles - inspired people, a shared planet, and an evolved portfolio - in an
effort to achieve, among other goals, increased diversity and inclusion in our
global workforce, increased sustainability of our products, and becoming carbon
positive. We call this responsible chemistry - it is rooted in who we are, and
we expect that our Corporate Responsibility Commitment will drive sustainable,
long-term earnings growth.
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The Chemours Company Recent Developments
Coronavirus Disease 2019 ("COVID-19")
The COVID-19 pandemic has, to date, resulted in nearly 50 million confirmed infections, over one million deaths, and continues to spread throughout the world. As a global provider of performance chemicals that are key inputs in end-products and processes in a variety of industries, a pandemic presents obstacles that can adversely impact our supply chain effectiveness and efficiencies, our manufacturing operations, customer demand for our products, and ultimately, our financial results. Throughout the outbreak and subsequent stages of the COVID-19 pandemic that have occurred thus far, above all, we have remained steadfast in our commitment to the health, safety, and well-being of our employees and their families, while serving our customers, and conserving cash to ensure the continuity of our business operations into the future. Although COVID-19 infections have continued to spread throughoutthe United States , we continue to experience minimal disruption in our operations and business-related processes. We have taken a number of measures to promote the safety and security of our employees, including requiring remote working arrangements for employees where practicable, the imposition of travel restrictions, limiting non-essential visits to plant sites, performing health checks before every shift, and providing personal protective equipment for our "essential" operations employees at our sites and labs. Due to reduced consumer demand for certain of our customers' end-products, however, we have experienced the negative impact of COVID-19 in our results of operations, and while certain markets and regions have started to exhibit early stages of market recovery, we anticipate that weakened consumer demand will continue to have a negative impact on our financial results. Refer to the "Segment Reviews" and "2020 Outlook" sections within this MD&A for further considerations regarding the quickly evolving market dynamics that are impacting our businesses and our associated response. We cannot predict with certainty the potential future impact of the COVID-19 pandemic on our customers' ability to manufacture their products, as well as any potential future disruptions in our supply chain due to restrictions on travel and transport, regional quarantines, and other social distancing measures. The risks and uncertainties posed by this significant, widespread event are enumerable and far-reaching, including but not limited to those described in Item 1A - Risk Factors in this Quarterly Report on Form 10-Q. Despite the health and safety, business continuity, and macroeconomic challenges associated with conducting business in the current environment, we remain committed to anticipating and meeting the demands of our customers, as they, like us, continue to navigate uncharted territory. As a precautionary measure in light of macroeconomic uncertainties driven by COVID-19, we drew$300 million from our revolving credit facility onApril 8, 2020 , which we subsequently repaid during the third quarter of 2020 based on the Company's liquidity position. We also elected to accept tax relief provided by various taxing jurisdictions, resulting in the deferral of approximately$80 million in tax payments. We continue to anticipate that our available cash, cash from operations, and existing debt financing arrangements will provide us with sufficient liquidity through at leastNovember 2021 . Additionally, we continue to engage in scenario planning, and, as further discussed in the "2020 Outlook" and "Liquidity and Capital Resources" sections of this MD&A, we have implemented a range of actions aimed at temporarily reducing costs and preserving liquidity, including exercising careful discretion in our near-term operating and capital spending decisions. We will evaluate additional cost actions, as necessary, as the operational and financial impacts to our Company continue to evolve. 42 --------------------------------------------------------------------------------The Chemours Company
Results of Operations and Business Highlights
Results of Operations
The following table sets forth our results of operations for the three and nine
months ended
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in millions, except per
share amounts) 2020 2019 2020 2019
Net sales $ 1,233 $ 1,390 $ 3,631 $ 4,173
Cost of goods sold 976 1,096 2,877 3,260
Gross profit 257 294 754 913
Selling, general, and
administrative expense 112 130 347 423
Research and development expense 22 20 67 61
Restructuring, asset-related,
and other charges 9 34 37 49
Total other operating expenses 143 184 451 533
Equity in earnings of affiliates 4 9 19 25
Interest expense, net (53 ) (53 ) (160 ) (156 )
Other (expense) income, net (5 ) 25 (6 ) 81
Income before income taxes 60 91 156 330
(Benefit from) provision for
income taxes (16 ) 15 (44 ) 65
Net income 76 76 200 265
Net income attributable to
Chemours $ 76 $ 76 $ 200 $ 265
Per share data
Basic earnings per share of
common stock $ 0.46 $ 0.46 $ 1.22 $ 1.60
Diluted earnings per share of
common stock 0.46 0.46 1.21 1.58
Net Sales
The following table sets forth the impacts of price, volume, currency, and
portfolio changes on our net sales for the three and nine months ended
Nine Months
Three Months Ended
Ended September September 30,
Change in net sales from prior period 30, 2020 2020
Price (5 )% (5 )%
Volume (4 )% (6 )%
Currency - % - %
Portfolio (2 )% (2 )%
Total change in net sales (11 )% (13 )%
Our net sales decreased by $157 million (or 11%) to $1.2 billion for the three
months ended September 30, 2020 , compared with net sales of $1.4 billion for the
same period in 2019. The components of the decrease in our net sales by segment
for the three months ended September 30, 2020 were as follows: in our
Fluoroproducts segment, price declined 5% and volume was down 11%; in our
Chemical Solutions segment, price declined 5%, volume was down 13%, and
portfolio change led to a 19% decrease; and, in our Titanium Technologies
segment, price declined 5% and volume was up 4%. Favorable currency movements
also added a 1% tailwind to net sales in our Titanium Technologies segment.
Our net sales decreased by $542 million (or 13%) to $3.6 billion for the nine
months ended September 30, 2020 , compared with net sales of $4.2 billion for the
same period in 2019. The components of the decrease in our net sales by segment
for the nine months ended September 30, 2020 were as follows: in our
Fluoroproducts segment, price declined 4% and volume was down 14%; in our
Chemical Solutions segment, price declined 4%, volume was down 12%, and
portfolio change led to a 19% decrease; and, in our Titanium Technologies
segment, price declined 6% and volume was up 5%. Unfavorable currency movements
also added a 1% headwind to net sales in our Fluoroproducts segment.
The drivers of these changes for each of our segments are discussed further under the "Segment Reviews" section within this MD&A.
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The Chemours Company Cost of Goods Sold Our cost of goods sold ("COGS") decreased by$120 million (or 11%) and$383 million (or 12%) to$1.0 billion and$2.9 billion for the three and nine months endedSeptember 30, 2020 , respectively, compared with COGS of$1.1 billion and$3.3 billion for the same periods in 2019. The decreases in our COGS for the three and nine months endedSeptember 30, 2020 were primarily attributable to lower net sales, as well as lower distribution, freight, and logistics expenses. In comparison with the prior year, we also did not incur costs during the nine months endedSeptember 30, 2020 in connection with unplanned outages at certain of our operating facilities, or costs associated with the start-up of our OpteonTM refrigerants facility inCorpus Christi, Texas . Our previous exit of the Methylamines and Methylamides business at ourBelle, West Virginia production facility also contributed to the reduction in COGS. These comparative reductions in COGS were partially offset by costs incurred in conjunction with the temporary idling of certain of our production lines during the second and third quarters of 2020 due to reduced customer demand.
Selling, General, and Administrative Expense
Our selling, general, and administrative ("SG&A") expense decreased by $18
million (or 14%) and $76 million (or 18%) to $112 million and $347 million for
the three and nine months ended September 30, 2020 , respectively, compared with
SG&A expense of $130 million and $423 million for the same periods in 2019. The
decreases in our SG&A expense for the three and nine months ended September 30,
2020 were primarily attributable to our cost reductions and our cost savings
initiatives in response to the COVID-19 pandemic as further discussed in the
"2020 Outlook" section of this MD&A.
Research and Development Expense
Our research and development expense increased by$2 million (or 10%) and$6 million (or 10%) to$22 million and$67 million for the three and nine months endedSeptember 30, 2020 , respectively, compared with research and development expense of$20 million and$61 million for the same periods in 2019. The increases in our research and development expense for the three and nine months endedSeptember 30, 2020 were primarily attributable to real estate costs associated with our research and development facility on the Science, Technology, andAdvanced Research campus of theUniversity of Delaware inNewark, Delaware .
Restructuring, Asset-Related, and Other Charges
Our restructuring, asset-related, and other charges decreased by$25 million (or 74%) and$12 million (or 24%) to$9 million and$37 million for the three and nine months endedSeptember 30, 2020 , respectively, compared with restructuring, asset-related, and other charges of$34 million and$49 million for the same periods in 2019. Our restructuring, asset-related, and other charges for the three and nine months endedSeptember 30, 2020 were primarily attributable to$3 million and$16 million , respectively, of net charges incurred in connection with employee-related separation liabilities under our recent restructuring programs. We also incurred$5 million of asset-related charges during the three and nine months endedSeptember 30, 2020 in connection with various property, plant, and equipment and other asset impairments in our Fluoroproducts segment, as well as$12 million of charges during the nine months endedSeptember 30, 2020 in connection with our decision announced in the second quarter of 2020 to exit the Aniline business and stop production at ourPascagoula, Mississippi manufacturing plant by the end of 2020. Our restructuring, asset-related, and other charges for the three and nine months endedSeptember 30, 2019 were primarily attributable to$12 million of charges incurred in connection with our decision to exit the Methylamines and Methylamides business at ourBelle, West Virginia manufacturing plant, as well as$17 million incurred in connection with our 2019 Restructuring Program. We also incurred$4 million and$18 million , respectively, of decommissioning and dismantling-related charges associated with the demolition and removal of certain unused buildings at our Chambers Works site inDeepwater, New Jersey .
Equity in Earnings of Affiliates
Our equity in earnings of affiliates decreased by$5 million (or 56%) and$6 million (or 24%) to$4 million and$19 million for the three and nine months endedSeptember 30, 2020 , respectively, compared with equity in earnings of affiliates of$9 million and$25 million for the same periods in 2019. The decreases in our equity in earnings of affiliates for the three and nine months endedSeptember 30, 2020 were primarily attributable to our reduced demand for our investees' products and the negative impacts of COVID-19 on end-market demand. 44
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The Chemours Company Interest Expense, Net Our interest expense, net was largely unchanged at$53 million and$160 million for the three and nine months endedSeptember 30, 2020 , respectively, compared with interest expense, net of$53 million and$156 million for the same periods in 2019.
Other Income (Expense), Net
Our other income (expense), net decreased by$30 million and$87 million to other expense, net of$5 million and$6 million for the three and nine months endedSeptember 30, 2020 , respectively, compared with other income, net of$25 million and$81 million for the same periods in 2019. The decreases in our other income, net were primarily attributable to unfavorable changes in net exchange gains and losses of$14 million and$30 million during the three and nine months endedSeptember 30, 2020 , respectively, driven by unfavorable movements in several foreign currencies, primarily the strengthening of the euro against theU.S. dollar, partially offset by our foreign currency forward contracts. Decreases in our leasing, contract services, and miscellaneous income further contributed to the decrease in our other income, net, driven by$1 million and$35 million lowerEuropean Union ("EU") fluorinated greenhouse gas ("F-Gas") quota authorization sales during the three and nine months endedSeptember 30, 2020 , respectively. We also recognized a non-cash gain of$9 million in the third quarter of 2019 in connection with the sale of our Repauno,New Jersey site.
Provision for (Benefit from) Income Taxes
Our provision for (benefit from) income taxes amounted to a benefit from income taxes of$16 million and a provision for income taxes of$15 million for the three months endedSeptember 30, 2020 and 2019, respectively, which represented effective tax rates of negative 27% and 16%, respectively. The$31 million decrease in our provision for income taxes for the three months endedSeptember 30, 2020 was primarily attributable to decreased profitability and changes to our geographic mix of earnings, as well as an income tax benefit of$11 million , net, related to the favorable impacts of certain elections and accounting method changes in connection with the filing of our 2019 U.S. federal income tax return. Such elections and accounting method changes were not reflected in our benefit from income taxes for the year endedDecember 31, 2019 , as they were not yet able to be quantified. Our provision for (benefit from) income taxes amounted to a benefit from income taxes of$44 million and a provision for income taxes of$65 million for the nine months endedSeptember 30, 2020 and 2019, respectively, which represented effective tax rates of negative 28% and 20%, respectively. The$109 million decrease in our provision for income taxes for the nine months endedSeptember 30, 2020 was primarily attributable to decreased profitability, changes to our geographic mix of earnings, and$8 million of additional income tax expense recorded in the second quarter of 2019 associated with the recognition of a valuation allowance on the deferred tax assets of a certain foreign subsidiary. We also recorded an income tax benefit of$18 million in the first quarter of 2020, which was related to theUnited States Internal Revenue Service acceptance of a non-automatic accounting method change that allows for the recovery of tax basis for depreciation, which had been previously disallowed. We also recorded an income tax benefit of$11 million , net, in the third quarter of 2020, related to the aforementioned favorable impacts of certain elections and accounting method changes in connection with the filing of our 2019 U.S. federal income tax return. Our benefit from income taxes was partially offset by$8 million of lower income tax benefits related to share-based payments. 45 --------------------------------------------------------------------------------
The Chemours Company Segment Reviews Adjusted earnings before interest, taxes, depreciation, and amortization ("Adjusted EBITDA") is the primary measure of segment profitability 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;
• (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 attributable to Chemours for
the three and nine months ended September 30, 2020 and 2019 is included in the
"Non-GAAP Financial Measures" section of this MD&A.
The following table sets forth our Adjusted EBITDA by segment for the three and
nine months ended
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in millions) 2020 2019 2020 2019
Fluoroproducts $ 112 $ 122 $ 350 $ 461
Chemical Solutions 12 23 45 55
Titanium Technologies 129 137 361 390
Corporate and Other (43 ) (34 ) (123 ) (113 )
Total Adjusted EBITDA $ 210 $ 248 $ 633 $ 793
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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 three and nine
months ended
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in millions) 2020 2019 2020 2019
Segment net sales $ 533 $ 636 $ 1,657 $ 2,034
Adjusted EBITDA 112 122 350 461
Adjusted EBITDA margin 21 % 19 % 21 % 23 %
The following table sets forth the impacts of price, volume, currency, and
portfolio changes on our Fluoroproducts segment's net sales for the three and
nine months ended
Three Months Nine Months
Ended September Ended September
Change in segment net sales from prior period 30, 2020 30, 2020
Price (5 )% (4 )%
Volume (11 )% (14 )%
Currency - % (1 )%
Portfolio - % - %
Total change in segment net sales (16 )% (19 )%
Segment Net Sales
Our Fluoroproducts segment's net sales decreased by $103 million (or 16%) to
$533 million for the three months ended September 30, 2020 , compared with
segment net sales of $636 million for the same period in 2019. The decrease in
segment net sales for the three months ended September 30, 2020 was primarily
attributable to decreases in volume and price of 11% and 5%, respectively.
Volumes declined due to the lagged negative impacts of COVID-19 on demand for
fluoropolymers products, as lower end-market demand experienced by our customers
in the second quarter of 2020 drove a reduction in our customers' demand for
fluoropolymers products in the third quarter of 2020. The negative impact of
demand weakness for fluoropolymers products was partially offset as the early
stages of market recovery led to increased customer demand for our refrigerants,
particularly in the automotive sector as original equipment manufacturers
("OEM") continued to improve their operating rates following their shutdowns in
the first and second quarters of 2020. Prices declined during the three months
ended September 30, 2020 , driven by our composition of product and customer mix,
as well as contractual price adjustments for refrigerants and market weakness in
certain geographies.
Our Fluoroproducts segment's net sales decreased by $377 million (or 19%) to
$1.7 billion for the nine months ended September 30, 2020 , compared with segment
net sales of $2.0 billion for the same period in 2019. The decrease in segment
net sales for the nine months ended September 30, 2020 was primarily
attributable to decreases in volume and price of 14% and 4%, respectively.
Volumes declined due to lower global customer demand for our refrigerants and
fluoropolymers, as initial softness in the automotive and other global
end-markets was compounded by the negative impact of COVID-19 on end-market
demand from our customers across several market sectors. Prices declined during
the nine months ended September 30, 2020 , driven by our composition of product
and customer mix, as well as contractual price adjustments for refrigerants and
market weakness in certain geographies. Unfavorable currency movements added a
1% headwind to the segment's net sales during the nine months ended September
30, 2020 .
Adjusted EBITDA and Adjusted EBITDA Margin
For the three months endedSeptember 30, 2020 , segment Adjusted EBITDA decreased by$10 million (or 8%) to$112 million and Adjusted EBITDA margin increased by approximately 200 basis points to 21%, compared with segment Adjusted EBITDA of$122 million and Adjusted EBITDA margin of 19% for the same period in 2019. For the nine months endedSeptember 30, 2020 , segment Adjusted EBITDA decreased by$111 million (or 24%) to$350 million and Adjusted EBITDA margin decreased by approximately 200 basis points to 21%, compared with segment Adjusted EBITDA of$461 million and Adjusted EBITDA margin of 23% for the same period in 2019. These changes in earnings were primarily attributable to the aforementioned decreases in the volume and price and unfavorable currency movements in the segment's net sales. We also incurred costs associated with the temporary idling of certain of our production lines during the second and third quarters of 2020 due to reduced customer demand. Additionally, for the nine months endedSeptember 30, 2020 , our EU F-gas quota authorization sales decreased by$35 million when compared with the nine months endedSeptember 30, 2019 . The aforementioned decreases to segment Adjusted EBITDA and Adjusted EBITDA margin during the three and nine months endedSeptember 30, 2020 were partially offset, and, in the instance of Adjusted EBITDA margin for the three months endedSeptember 30, 2020 , more than offset, by enhanced operational performance at certain of our operating facilities, cost savings associated with the ramp-up of production at our OpteonTM refrigerants facility inCorpus Christi, Texas , and structural cost reductions. 47
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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 three and nine
months ended
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in millions) 2020 2019 2020 2019
Segment net sales $ 88 $ 140 $ 263 $ 404
Adjusted EBITDA 12 23 45 55
Adjusted EBITDA margin 14 % 16 % 17 % 14 %
The following table sets forth the impacts of price, volume, currency, and
portfolio changes on our Chemical Solutions segment's net sales for the three
and nine months ended
Three Months Nine Months
Ended September Ended September
Change in segment net sales from prior period 30, 2020 30, 2020
Price (5 )% (4 )%
Volume (13 )% (12 )%
Currency - % - %
Portfolio (19 )% (19 )%
Total change in segment net sales (37 )% (35 )%
Segment Net Sales
Our Chemical Solutions segment's net sales decreased by $52 million (or 37%) to
$88 million for the three months ended September 30, 2020 , compared with segment
net sales of $140 million for the same period in 2019. The decrease in segment
net sales for the three months ended September 30, 2020 was attributable to
portfolio change, which drove a 19% decline in net sales following our exit of
the Methylamines and Methylamides business at our Belle, West Virginia
production facility. Segment net sales volumes decreased 13%, driven by the
continued adverse impacts of the COVID-19 pandemic on the operations of several
mining customers and overall end-market demand. Average prices decreased 5%,
driven by market dynamics compared with the prior year quarter.
Our Chemical Solutions segment's net sales decreased by $141 million (or 35%) to
$263 million for the nine months ended September 30, 2020 , compared with segment
net sales of $404 million for the same period in 2019. The decrease in segment
net sales for the nine months ended September 30, 2020 was attributable to
portfolio change, which drove a 19% decline in net sales following our exit of
the Methylamines and Methylamides business at our Belle, West Virginia
production facility. Segment net sales volumes decreased 12%, driven by the
adverse impacts of the COVID-19 pandemic on the operations of several mining
customers and overall end-market demand. Average prices decreased 4%, driven by
market dynamics compared with the nine months ended September 30, 2019 .
Adjusted EBITDA and Adjusted EBITDA Margin
For the three months endedSeptember 30, 2020 , segment Adjusted EBITDA decreased by$11 million (or 48%) to$12 million and Adjusted EBITDA margin decreased by approximately 200 basis points to 14%, compared with segment Adjusted EBITDA of$23 million and Adjusted EBITDA margin of 16% for the same period in 2019. For the nine months endedSeptember 30, 2020 , segment Adjusted EBITDA decreased by$10 million (or 18%) to$45 million and Adjusted EBITDA margin increased by approximately 300 basis points to 17%, compared with segment Adjusted EBITDA of$55 million and Adjusted EBITDA margin of 14% for the same period in 2019. These changes in earnings were primarily attributable to the aforementioned decreases in segment net sales, as well as licensing income recognized in the third quarter of 2019 that did not recur in the third quarter of 2020. The aforementioned decreases to segment Adjusted EBITDA and Adjusted EBITDA margin were partially offset, and, in the instance of Adjusted EBITDA margin for the nine months endedSeptember 30, 2020 , more than offset, by the cost savings associated with our exit of the Methylamines and Methylamides business at ourBelle, West Virginia production facility. 48
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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 three and
nine months ended
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in millions) 2020 2019 2020 2019
Segment net sales $ 612 $ 614 $ 1,711 $ 1,735
Adjusted EBITDA 129 137 361 390
Adjusted EBITDA margin 21 % 22 % 21 % 22 %
The following table sets forth the impacts of price, volume, currency, and
portfolio changes on our Titanium Technologies segment's net sales for the three
and nine months ended
Three Months Nine Months
Ended September Ended September
Change in segment net sales from prior period 30, 2020 30, 2020
Price (5 )% (6 )%
Volume 4 % 5 %
Currency 1 % - %
Portfolio - % - %
Total change in segment net sales - % (1 )%
Segment Net Sales
Our Titanium Technologies segment's net sales decreased by $2 million (or less
than 1%) to $612 million for the three months ended September 30, 2020 , compared
with segment net sales of $614 million for the same period in 2019. The decrease
in segment net sales for the three months ended September 30, 2020 was primarily
attributable to a decrease in price of 5%, which was largely offset by an
increase in volume of 4%. Price declined for the three months ended September
30, 2020 due to customer, channel, and product mix, as well as targeted price
reductions which occurred prior to the third quarter of 2020. Volume increases
were driven by an uptick in global customer demand for our Ti-PureTM TiO2, as we
started to see the early stages of market recovery in several markets and
regions. Favorable currency movements added a 1% tailwind to the segment's net
sales during the three months ended September 30, 2020 .
Our Titanium Technologies segment's net sales decreased by $24 million (or 1%)
to $1.7 billion for the nine months ended September 30, 2020 , compared with
segment net sales of $1.7 billion for the same period in 2019. The decrease in
segment net sales for the nine months ended September 30, 2020 was primarily
attributable to a decrease in price of 6%, which was largely offset by an
increase in volume of 5%. Price declined for the nine months ended September 30,
2020 due to customer, channel, and product mix, as well as targeted price
reductions which primarily occurred prior to the first quarter of 2020. Volume
increases were driven by share regain in the first quarter of 2020, as well as
the early stages of market recovery in several markets and regions in the third
quarter of 2020. These volume increases were partially offset by lower global
customer demand for our Ti-PureTM TiO2 in the second quarter of 2020, as
COVID-19 negatively impacted end-market demand from our customers across several
markets and regions.
Adjusted EBITDA and Adjusted EBITDA Margin
For the three months endedSeptember 30, 2020 , segment Adjusted EBITDA decreased by$8 million (or 6%) to$129 million and Adjusted EBITDA margin decreased by approximately 100 basis points to 21%, compared with segment Adjusted EBITDA of$137 million and Adjusted EBITDA margin of 22% for the same period in 2019. For the nine months endedSeptember 30, 2020 , segment Adjusted EBITDA decreased by$29 million (or 7%) to$361 million and Adjusted EBITDA margin decreased by approximately 100 basis points to 21%, compared with segment Adjusted EBITDA of$390 million and Adjusted EBITDA margin of 22% for the same period in 2019. These decreases in earnings during the three and nine months endedSeptember 30, 2020 were primarily attributable to the aforementioned decreases in price in the segment's net sales and lower fixed cost absorption due to reduced operating rates, partially offset by increased volumes in the segment's net sales. 49
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The Chemours Company Corporate and Other Corporate and Other costs increased by$9 million (or 26%) and$10 million (or 9%) to$43 million and$123 million for the three and nine months endedSeptember 30, 2020 , compared with Corporate and Other costs of$34 million and$113 million for the same periods in 2019. These increases in Corporate and Other costs for the three and nine months endedSeptember 30, 2020 were primarily attributable to higher costs associated with environmental remediation matters. This increase was partially offset by lower external spend, which is consistent with our cost savings initiatives in response to the COVID-19 pandemic as further discussed in the "2020 Outlook" section of this MD&A. 2020 Outlook While the COVID-19 pandemic has introduced a tremendous amount of uncertainty into global markets and local economies, we continue to believe that we are well-positioned to respond to the rapidly evolving market dynamics that are impacting our businesses. However, in anticipation of declines in customer demand driven by COVID-19, we implemented a range of actions aimed at reducing costs by reducing all discretionary spend, freezing non-critical hiring, and delaying external spend wherever possible. We also reduced structural plant fixed costs to improve the efficiency of our production units, an initiative that was already in flight at the end of 2019. In addition, where legally permissible, we made temporary base pay reductions for salaried employees globally, until we saw an improvement in demand across the Company. This included our Chief Executive Officer who took a temporary base salary reduction of 40% and the executive team who took a temporary base salary reduction of 30%. These temporary base salary reductions were discontinued inSeptember 2020 . Overall, these actions are expected to reduce our costs for the year endingDecember 31, 2020 by approximately$160 million . We are also reducing our capital spending by$125 million for the year endingDecember 31, 2020 , only proceeding with capital projects considered critical in the near-term. If the macroeconomic situation deteriorates or the duration of the pandemic is extended, we will evaluate additional cost actions, as necessary, as the operational and financial impacts to our Company continue to evolve. In our Fluoroproducts segment, we anticipate experiencing an uneven recovery in global customer demand, following a third quarter reflective of the early stages of demand recovery for our refrigerants and a lagged reduction in demand for our fluoropolymers products. Customer demand for our refrigerants products may also be somewhat impacted by normal seasonality trends within the business as we enter the fourth quarter of 2020. We remain in frequent communication with our customers to fully understand their evolving product needs and to optimize our production volumes, as necessary. As customer demand for our products continues to recover from the negative impacts of COVID-19 on end-market demand, we expect to continue to recognize the benefits of enhanced operational performance and structural cost reductions within the segment. We are also continuing our investment to prevent the illegal import of legacy HFC refrigerants into the EU, in violation of the EU's F-gas regulations. In our Chemical Solutions segment, trends in our future net sales volumes will be driven by our customers' mining operations, as they work towards returning to normalized production volumes following temporary operating restrictions imposed during COVID-19. At that time, we anticipate that demand for our products will begin to normalize. Our future net sales will also be dependent upon the average prices of our products, which are driven by the impacts of market dynamics. We continue to focus on operations productivity, inventory management, and cash generation in this segment. In our Titanium Technologies segment, we expect that we will continue to experience the early stages of an uneven market recovery in the markets and regions in which we participate, while certain countries within these regions have not yet started to emerge from the negative economic impacts of COVID-19. We continue to collaborate with and remain connected to our customers in meeting their future demands, while simultaneously managing our own inventories balances to optimize net working capital. Given our strong position in ore feedstock and our ability to secure supply, we are appropriately positioned to maintain our commitment to our Ti-PureTM Value Stabilization ("TVS") strategy, allowing us to continue to offer our customers a predictable and reliable supply of high-quality TiO2. Through execution of this strategy, our Assured Value Agreements ("AVA") promote net working capital stability, allowing our customers to purchase TiO2 with supply assurance and price predictability as the market recovery begins. Alternatively, our Ti-PureTM Flex online portal provides our customers with the opportunity to secure their respective product needs and pricing for up to six months. Our third-party agents and distributors also continue to serve markets that we may not reach directly. In responding to the COVID-19 pandemic and its subsequent impacts on global markets and local economies, we remain focused on matters that are within our control. Through the underlying strengths of our business operations, financial results and condition, and cash flows, we are fully engaged to protect the health and well-being of our employees and serve our customers. However, in considering the unpredictability of the duration and magnitude of the impact of the COVID-19 pandemic, particularly as it relates to our operations and end-market demand, we are not currently providing full-year 2020 financial guidance. Our previous guidance, as issued onFebruary 13, 2020 , was withdrawn onMay 5, 2020 . 50
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The Chemours Company 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 15 - Debt" to the Interim Consolidated Financial Statements and "Note 20 - Debt" to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . 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 past industry and economic cycles, evidencing the underlying operating strength of our businesses. As noted in the "2020 Outlook" section within this MD&A, however, significant uncertainty continues to exist concerning both the magnitude and the duration of the impacts to our financial results and condition as caused by the COVID-19 pandemic. Regardless of size and duration, these rapidly evolving challenges have had and will continue to have an adverse impact on our operating cash flows. However, based on our responses to the COVID-19 pandemic, including the business-related initiatives discussed in our "2020 Outlook", we anticipate that our available cash, cash from operations, and existing debt financing arrangements will provide us with sufficient liquidity through at leastNovember 2021 . AtSeptember 30, 2020 , we had total cash and cash equivalents of$956 million , of which$650 million was held by our foreign subsidiaries. All cash and cash equivalents held by our foreign subsidiaries is readily convertible into currencies used in our operations, including theU.S. dollar. During the nine months endedSeptember 30, 2020 , we received approximately$280 million of net cash in theU.S. through intercompany loans and dividends. Traditionally, the cash and earnings of our foreign subsidiaries have generally been used to finance their operations and capital expenditures, and it is our intention to indefinitely reinvest the historical pre-2018 earnings of our foreign subsidiaries. However, beginning in 2018, management asserts that only certain foreign subsidiaries are indefinitely reinvested. For further information related to our income tax positions, see "Note 9 - Income Taxes" to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . Management believes that sufficient liquidity is available in theU.S. through at leastNovember 2021 , which includes borrowing capacity under our revolving credit facility. During the nine months endedSeptember 30, 2020 , we decided to take certain precautionary measures in light of macroeconomic uncertainties driven by COVID-19. OnApril 8, 2020 , we drew$300 million from our revolving credit facility, which we subsequently repaid during the third quarter of 2020 based on the Company's liquidity position. As ofSeptember 30, 2020 , no borrowings remain outstanding under the revolving credit facility, although outstanding letters of credit of$98 million offset our borrowing availability from the maximum capacity of$800 million . The availability under our revolving credit facility is subject to a maintenance covenant based on senior secured net debt and the last 12 months of consolidated EBITDA, as defined in our amended and restated credit agreement. Based on our forecasts and plans, we anticipate that we will be in compliance with our credit facility covenants through at leastNovember 2021 . For further details regarding our debt covenants pursuant to the amended and restated credit agreement of our senior secured credit facilities, see "Note 20 - Debt" to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . In addition to the borrowings under our revolving credit facility, we also elected to accept tax relief provided by various taxing jurisdictions. The accepted relief primarily applies to foreign taxing jurisdictions and resulted in the deferral of approximately$80 million in tax payments, which are largely expected to be made in the first quarter of 2021. We anticipate making significant payments for interest, critical 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 continue to believe our sources of liquidity are sufficient to fund our planned operations and to meet our interest, dividend, and contractual obligations through at leastNovember 2021 . Our financial policy seeks to: (i) selectively invest in organic and inorganic growth to enhance our portfolio, including certain strategic capital investments; (ii) maintain appropriate leverage by using free cash flows to repay outstanding borrowings; and, (iii) return cash to shareholders through dividends and share repurchases. Specific to our objective to return cash to shareholders, in recent quarters, we have previously announced dividends of$0.25 per share, amounting to approximately$160 million per year, and, onOctober 28, 2020 , we announced our quarterly cash dividend of$0.25 per share for the fourth quarter of 2020. Under our 2018 Share Repurchase Program, as further discussed in Item 2 - Unregistered Sales ofEquity Securities and Use of Proceeds in this Quarterly Report on Form 10-Q, we also have remaining authority to repurchase$428 million of our outstanding common stock. In light of the COVID-19 pandemic, we do not currently plan to repurchase additional shares of our outstanding common stock in the near future. 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. 51
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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 nine months ended
September 30, 2020 and 2019.
Nine Months Ended September 30,
(Dollars in millions) 2020 2019
Cash provided by operating activities $ 454 $ 250
Cash used for investing activities (210 ) (387 ) Cash used for financing activities (252 ) (360 ) Operating Activities We generated$454 million and$250 million in cash flows from our operating activities during the nine months endedSeptember 30, 2020 and 2019, respectively. The increase in our operating cash inflows for the nine months endedSeptember 30, 2020 was primarily attributable to lower raw materials inventories purchases, as well as the$125 million of accounts receivables sold to the bank pursuant to the amended and restated receivables purchase agreement (the "Amended Purchase Agreement") under our accounts receivable securitization facility ("Securitization Facility"). The increase in our comparative operating cash inflows was also attributable to a reduction in tax payments made in 2020, a decrease in certain employee-related costs, and our cost savings initiatives in response to the COVID-19 pandemic. These comparative increases in our operating cash flows for the nine months endedSeptember 30, 2020 were partially offset by a decrease in our net income, as well as a comparative increase in our remaining accounts receivable. Investing Activities We used$210 million and$387 million in cash flows for our investing activities during the nine months endedSeptember 30, 2020 and 2019, respectively. Our investing cash outflows for the nine months endedSeptember 30, 2020 and 2019 were primarily attributable to purchases of property, plant, and equipment, amounting to$214 million and$385 million , respectively. The comparative reduction in our purchases of property, plant, and equipment during the nine months endedSeptember 30, 2020 was primarily attributable to temporary cash preservation initiatives, which were implemented in anticipation of declining customer demand as driven by COVID-19. For further information related to our temporary cash preservation initiatives and the anticipated impact on our capital spending for the year endingDecember 31, 2020 , refer to the "2020 Outlook" section within this MD&A. The comparative reduction in our purchases of property, plant, and equipment was also attributable to our prior year capital expenditures associated with the construction of our research and development facility on the Science, Technology, andAdvanced Research campus of theUniversity of Delaware inNewark, Delaware and our investment in a thermal oxidizer to reduce aerial PFAS emissions from our Fayetteville Works site inFayetteville, North Carolina . Our investing cash outflows for the nine months endedSeptember 30, 2020 were also attributable to a$10 million installment payment associated with our acquisition ofSouthern Ionics Minerals, LLC ("SIM") in the third quarter of 2019. We also made$10 million of upfront cash consideration payments in connection with this acquisition during the third quarter of 2019. For further information related to our 2019 acquisition of SIM, see "Note 3 - Acquisitions and Divestitures" to the Interim Consolidated Financial Statements and "Note 4 - Acquisitions and Divestitures" to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . 52
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The Chemours Company Financing Activities We used$252 million in cash flows for our financing activities during the nine months endedSeptember 30, 2020 . Our financing cash outflows for the nine months endedSeptember 30, 2020 were primarily attributable to our capital allocation activities, resulting in$123 million returned to our shareholders in the form of cash dividends paid. Our financing cash outflows were also attributable to the amendment and restatement of our receivables purchase agreement dated as ofJuly 12, 2019 (the "Original Purchase Agreement") under our Securitization Facility, resulting in net repayments of$110 million to settle the associated collateralized borrowings. Aside from these payments associated with our Securitization Facility, we also made$18 million in debt repayments. Our financing cash outflows for the nine months endedSeptember 30, 2020 are also inclusive of our repayment of$300 million in proceeds received from drawing on our revolving credit facility, which was executed onApril 8, 2020 as a precautionary measure in light of macroeconomic uncertainties driven by COVID-19. We used$360 million in cash flows for our financing activities during the nine months endedSeptember 30, 2019 . Our financing cash outflows for the nine months endedSeptember 30, 2019 were primarily attributable to our capital allocation activities, resulting in$446 million of cash returned to shareholders through our 2018 Share Repurchase Program and through cash dividends paid. We also made$30 million in payments for withholding taxes on certain of our vested stock-based compensation awards, as well as$15 million in debt repayments. Our financing cash outflows are also inclusive of our repayment of$150 million in proceeds received from drawing on our revolving credit facility, which was executed for general corporate purposes. The repayment was made during the third quarter of 2019, primarily using the$125 million of proceeds received from the Securitization Facility, as well as available cash. The Securitization Facility is further described in "Note 15 - Debt" to the Interim Consolidated Financial Statements. Current Assets
The following table sets forth the components of our current assets at
(Dollars in millions) September 30, 2020 December 31, 2019 Cash and cash equivalents $ 956 $ 943 Accounts and notes receivable, net 572 674 Inventories 993 1,079 Prepaid expenses and other 84 81 Total current assets $ 2,605 $ 2,777 Our accounts and notes receivable, net decreased by$102 million (or 15%) to$572 million atSeptember 30, 2020 , compared with accounts and notes receivable, net of$674 million atDecember 31, 2019 . The decrease in our accounts and notes receivable, net atSeptember 30, 2020 was primarily attributable to$125 million of accounts receivables sold to the bank in accordance with the Amended Purchase Agreement under our Securitization Facility, as well as lower net sales in the third quarter of 2020 versus the fourth quarter of 2019. These decreases in our accounts and notes receivable, net atSeptember 30, 2020 were partially offset by the timing of payments from our customers at the previous year-end. Our inventories decreased by$86 million (or 8%) to$1.0 billion atSeptember 30, 2020 , compared with inventories of$1.1 billion atDecember 31, 2019 . The decrease in our inventories atSeptember 30, 2020 was primarily attributable to lower raw materials inventories purchases in connection with lower sales volumes, which was partially offset by the seasonal build-up of our finished products inventories in the first quarter of 2020.
Our prepaid expenses and other assets were largely unchanged at
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The Chemours Company Current Liabilities
The following table sets forth the components of our current liabilities at
(Dollars in millions) September 30, 2020 December 31, 2019 Accounts payable $ 701 $ 923 Short-term and current maturities of long-term debt 32 134 Other accrued liabilities 575 484 Total current liabilities $ 1,308 $ 1,541 Our accounts payable decreased by$222 million (or 24%) to$701 million atSeptember 30, 2020 , compared with accounts payable of$923 million atDecember 31, 2019 . The decrease in our accounts payable atSeptember 30, 2020 was primarily attributable to lower raw materials inventories purchases in connection with lower sales volumes, our cost savings initiatives in response to the COVID-19 pandemic, and the timing of payments to our vendors. Our short-term and current maturities of long-term debt decreased by$102 million (or 76%) to$32 million atSeptember 30, 2020 , compared with short-term and current maturities of long-term debt of$134 million atDecember 31, 2019 . The decrease in our short-term and current maturities of long-term debt atSeptember 30, 2020 was primarily attributable to the amendment and restatement of the Original Purchase Agreement under our Securitization Facility, resulting in the settlement of$110 million in collateralized borrowings outstanding as ofDecember 31, 2019 . Our other accrued liabilities increased by$91 million (or 19%) to$575 million atSeptember 30, 2020 , compared with other accrued liabilities of$484 million atDecember 31, 2019 . The increase in our other accrued liabilities atSeptember 30, 2020 was primarily attributable to a$40 million increase in interest accrued as driven by our senior unsecured notes, a$33 million increase in deferrals of certain income tax payments, a$23 million increase for environmental remediation at certain of our sites, and an increase for certain employee-related costs. These increases in our other accrued liabilities atSeptember 30, 2020 were partially offset by recognition of customer rebates, primarily during the first quarter of 2020, as well as a$10 million installment payment in the third quarter of 2020 in connection with our acquisition of SIM in the third quarter of 2019. Credit Facilities and Notes See "Note 15 - Debt" to the Interim Consolidated Financial Statements and "Note 20 - Debt" to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year endedDecember 31, 2019 for a discussion of our credit facilities and notes. 54
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The Chemours Company Guarantor Financial Information
The following disclosures set forth summarized financial information and
alternative disclosures in accordance with Rule 13-01 of Regulation S-X ("Rule
13-01"). These disclosures have been made in connection with certain
subsidiaries' guarantees of the 6.625% senior unsecured notes due May 2023 , the
7.000% senior unsecured notes due May 2025 , the 4.000% senior unsecured notes
due May 2026 , which are denominated in euros, and the 5.375% senior unsecured
notes due May 2027 (collectively, the "Notes"). Each series of the Notes was
issued by The Chemours Company (the "Parent Issuer"), and was fully and
unconditionally guaranteed, jointly and severally, on a senior unsecured basis
by the same group of subsidiaries of the Parent Issuer (together, the "Guarantor
Subsidiaries"), subject to certain exceptions as set forth in "Note 20 - Debt"
to the Consolidated Financial Statements in our Annual Report on Form 10-K for
the year ended December 31, 2019 . The assets, liabilities, and operations of the
Guarantor Subsidiaries primarily consist of those attributable to The Chemours
Company FC, LLC , our primary operating subsidiary in the United States , as well
as the other U.S. -based operating subsidiaries as set forth in Exhibit 22 to
this Quarterly Report on Form 10-Q. Each of the Guarantor Subsidiaries is 100%
owned by the Company. None of our other subsidiaries, either direct or indirect,
guarantee the Notes (together, the "Non-Guarantor Subsidiaries"). Pursuant to
the indentures governing the Notes, the Guarantor Subsidiaries will be
automatically released from those guarantees upon the occurrence of certain
customary release provisions.
Our summarized financial information is presented on a combined basis,
consisting of the Parent Issuer and Guarantor Subsidiaries (collectively, the
"Obligor Group "), in accordance with the requirements under Rule 13-01, and is
presented after the elimination of: (i) intercompany transactions and balances
among the Parent Issuer and Guarantor Subsidiaries, and (ii) equity in earnings
from and investments in the Non-Guarantor Subsidiaries.
(Dollars in millions) Nine Months Ended September 30, 2020
Net sales $ 2,399
Gross profit 318
Loss before income taxes (4 )
Net income 32
Net income attributable to Chemours 32
(Dollars in millions) September 30, 2020 December 31, 2019
Assets
Current assets (1,2,3) $ 1,223 $ 1,063
Long-term assets (4) 4,219 4,339
Liabilities
Current liabilities (2) $ 1,220 $ 1,045
Long-term liabilities 4,784 4,871
(1) Current assets includes
equivalents at
(2) Current assets includes
accounts receivable from the Non-Guarantor Subsidiaries at
2020 and
Non-Guarantor Subsidiaries at
respectively.
(3) As of September 30, 2020 and December 31, 2019 , $70 million and $176
million of accounts receivable generated by the Obligor Group ,
respectively, remained outstanding with one of the Non-Guarantor
Subsidiaries under the Securitization Facility.
(4) Long-term assets includes
from the Non-Guarantor Subsidiaries at
2019.
There are no significant restrictions that may affect the ability of the
Guarantor Subsidiaries in guaranteeing the Parent Issuer's obligations under our
debt financing arrangements. While the Non-Guarantor Subsidiaries do not
guarantee the Parent Issuer's obligations under our debt financing arrangements,
we may, from time to time, repatriate post-2017 earnings from certain of these
subsidiaries to meet our financing obligations, as well.
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The Chemours Company Supplier Financing We maintain supply chain finance programs with several financial institutions. The programs 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. AtSeptember 30, 2020 andDecember 31, 2019 , the total amounts outstanding under these programs were$109 million and$106 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. Contractual Obligations Our contractual obligations atSeptember 30, 2020 did not significantly change from the contractual obligations previously disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2019 .
Off-Balance Sheet Arrangements
InMarch 2020 , through a wholly-owned special purpose entity, we entered into the Amended Purchase Agreement, which amends and restates, in its entirety, the Original Purchase Agreement under our Securitization Facility. See "Note 15 - Debt" to the Interim Consolidated Financial Statements for further details regarding this off-balance sheet arrangement.
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.
Critical Accounting Policies and Estimates
Our significant accounting policies are described in our MD&A and "Note 3 - Summary of Significant Accounting Policies" to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . There have been no material changes to these critical accounting policies and estimates previously disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2019 , except as described in "Note 2 - Recent Accounting Pronouncements" to the Interim Consolidated Financial Statements.
Recent Accounting Pronouncements
See "Note 2 - Recent Accounting Pronouncements" to the Interim Consolidated Financial Statements for a discussion about recent accounting pronouncements.
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The Chemours Company 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 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 our separation from DuPont onJuly 1, 2015 (the "Separation"). 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 Comprehensive Environmental Response Compensation and Liability Act ("CERCLA", often referred to as "Superfund"), the Resource Conservation and Recovery Act ("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. AtSeptember 30, 2020 andDecember 31, 2019 , our consolidated balance sheets include environmental remediation liabilities of$398 million and$406 million , respectively, relating to these matters, which, as discussed in further detail below, include$199 million and$201 million , respectively, for ourFayetteville Works site inFayetteville, North Carolina ("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$560 million above the amount accrued atSeptember 30, 2020 . 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. 57
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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
(Dollars in millions) September 30, 2020 December 31, 2019 Chambers Works, Deepwater, New Jersey $ 19 $ 20 East Chicago, Indiana 14 17 Fayetteville Works, Fayetteville, North Carolina 199 201 Pompton Lakes, New Jersey 42 43 USS Lead, East Chicago, Indiana 13 13 All other sites 111 112 Total environmental remediation $ 398 $ 406 The five sites listed above represent 72% of our total accrued environmental remediation liabilities atSeptember 30, 2020 andDecember 31, 2019 . For these five sites, we expect to spend, in the aggregate,$138 million over the next three years. For all other sites, we expect to spend$67 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. 58 --------------------------------------------------------------------------------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$14 million remained as ofSeptember 30, 2020 . 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 oversight by theNorth Carolina Department of Environmental Quality ("NC DEQ"), 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 17 - Commitments and Contingent Liabilities" to the Interim Consolidated Financial Statements, we, along with NC DEQ andCape Fear River Watch ("CFRW"), a non-profit organization, have filed a final Consent Order ("CO") that comprehensively addressed various issues, NOVs, and court filings made by the NC DEQ regardingFayetteville and resolved litigations filed by the NC DEQ and CFRW. In connection with the CO, 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 our Corrective Action Plan ("CAP") to NC DEQ. The Supplemental Information Report provided information to support the evaluation of potential interim remedial options to reduce PFAS loadings to surface waters. The CAP described potential long-term remediation activities to address PFAS in on-site groundwater and surface waters at the site, in accordance with the requirements of the CO and theNorth Carolina groundwater standards, and built on the previous submissions to NC DEQ. The NC DEQ made the CAP available for public review and comment untilApril 6, 2020 , and we are awaiting formal response to the CAP from NC DEQ following the conclusion of the public comment period. InAugust 2020 , we, along with NC DEQ and CFRW, reached agreement on the terms of an addendum to the CO (the "Addendum"). The Addendum represents the parties' collective agreement regarding specified remedial measures and defined timelines for reducing PFAS loadings fromFayetteville to theCape Fear River , including construction of a barrier wall with groundwater extraction system to be completed byMarch 15, 2023 . Detailed engineering and design work has commenced with NC DEQ approval of permit applications anticipated inAugust 2021 , as well as two stages of design approval anticipated inAugust 2021 andMarch 2022 . After a period of public comment, the Addendum was approved by theNorth Carolina Superior Court for Bladen County onOctober 12, 2020 . 59
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The Chemours Company
As of the third quarter of 2020, based on the CO, the Addendum, the CAP, and our
plans, which are based on current regulations and technology, we have accrued
$142 million and $57 million related to the estimated cost of on-site and
off-site remediation, respectively. For the three and nine months ended
September 30, 2020 , we accrued an additional $10 million and $31 million ,
respectively, which was largely attributable to off-site groundwater testing and
water treatment system installations at additional qualifying properties in the
vicinity surrounding Fayetteville . The amounts accrued during the three and nine
months ended September 30, 2020 are net of $3 million and $7 million ,
respectively, of changes in estimates related to the cost of installing,
maintaining, and monitoring certain water treatment systems. During most of the
second quarter of 2020, testing of drinking water wells and water treatment
system installations were temporarily suspended in connection with health and
safety precautions taken during the COVID-19 pandemic. We resumed residential
sampling and installation of water treatment systems in June 2020 . Off-site
installation, maintenance, and monitoring may be impacted by additional changes
in estimates as actual experience may differ from management's estimates.
Pompton Lakes, New Jersey
During the 20th century, blasting caps, fuses, and related materials were
manufactured at Pompton 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 the EPA and the New 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. In September 2015 , the EPA 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 in May 2016 , and work on the lake
dredging project is now complete. In April 2019 , we submitted a revised
Corrective Measures Study ("CMS") proposing actions to address on-site soils
impacted from past operations that exceed applicable clean-up criteria. We
received comments on the CMS from the EPA and NJ DEP in March 2020 , and we
responded to their comments in June 2020 .
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. ("U.S. 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 (the "ROD Amendment") for a portion of Zone 1 inDecember 2018 (following itsAugust 2018 Feasibility Study Addendum), with its recommended option based on future residential use. TheEPA 's ROD Amendment for modified Zone 1 was released inMarch 2020 , and selects as the preferred remedy one which requires a clean-up to residential standards based on the current applicable residential zoning. The ROD Amendment for modified Zone 1 also sets forth a selected contingent remedy which requires clean-up to commercial/industrial standards if the future land use becomes commercial/industrial. InNovember 2019 , a Letter of Intent was executed by theCity of East Chicago, Indiana andIndustrial Development Advantage, LLC , relating to modified Zone 1 development, and theEPA has indicated that it is "more likely" that future land use in this area will be commercial/industrial and not residential. We expect that our future costs for modified Zone 1 will be contingent on the development of this area and implementation under the ROD Amendment, 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 17 - Commitments and Contingent Liabilities" to the Interim Consolidated Financial Statements. 60 --------------------------------------------------------------------------------
The Chemours Company Climate Change In 2018, we issued our inaugural Corporate Responsibility Commitment 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 principles of inspired people, shared planet, and an evolved portfolio, our shared planet principle 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 becomecarbon 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, acting on opportunities
to reduce our GHG emissions, enhancing the eco-efficiency of our supply chain,
and 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 research and development in order 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 17 - Commitments and Contingent Liabilities" to the Interim Consolidated Financial Statements.
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. PFAS OnMay 11, 2020 , ECHA announced that five Member States (Germany ,the Netherlands ,Norway ,Sweden , andDenmark ) launched a call for evidence to inform a PFAS restriction proposal. Companies producing or using PFAS, as well as selling mixture or products containing PFAS, were invited to provide input. This call for evidence closedJuly 31, 2020 . Thousands of substances meet the definition of PFAS as outlined in the call for evidence. This very broad definition covers substances with a variety of physical and chemical properties, health and environmental profiles, uses, and benefits. We submitted information on the substances covered by the call for evidence to the Member State competent authority forGermany , which is theFederal Institute for Occupational Safety and Health ("BAuA").
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. InMarch 2020 , theChancery Court granted DuPont's Motion to Dismiss, placing the matter in non-public binding arbitration. We have appealed the ruling to theDelaware Supreme Court , which has set argument en banc forDecember 2, 2020 . Pending the result of the appeal, the matter is proceeding concurrently in arbitration. DuPont has asserted a counterclaim for breach of the Master Separation Agreement. Management believes that the probability of loss as to the counterclaim is remote. Many of the potential litigation liabilities discussed in "Note 17 - Commitments and Contingent Liabilities" to the Interim Consolidated Financial Statements are at issue in the matter. 61
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The Chemours Company Non-GAAP Financial Measures We prepare our interim consolidated financial statements in accordance with generally accepted accounting principles in theU.S. ("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;
• (gains) losses on sales of assets and businesses; 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 (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 calculated by dividing Adjusted Net Income by the
weighted-average number of our common shares outstanding. Diluted Adjusted EPS
accounts for the dilutive impact of our stock-based compensation awards, which
includes unvested restricted shares. 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 our net debt, or debt less cash and
cash equivalents, 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 Quarterly Report on Form 10-Q, should be read in
conjunction with the Interim Consolidated Financial Statements and notes thereto
included in this report, as well as the Consolidated Financial Statements and
notes thereto included in our Annual Report on Form 10-K for the year ended
December 31, 2019 .
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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 attributable to Chemours for the
three and nine months ended
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in millions, except per
share amounts) 2020 2019 2020 2019
Net income attributable to
Chemours $ 76 $ 76 $ 200 $ 265
Non-operating pension and other
post-retirement employee benefit
(income) cost (1 ) 1 (2 ) (5 )
Exchange losses (gains), net 9 (5 ) 28 (2 )
Restructuring, asset-related,
and other charges (1) 9 34 37 49
Gain on sales of assets and
businesses (2) - (9 ) - (11 )
Transaction costs - - 2 1
Legal and environmental charges
(3) 1 5 12 43
Adjustments made to income taxes
(4) (10 ) 3 (32 ) 5
Benefit from income taxes
relating to reconciling items
(5) (6 ) (7 ) (19 ) (18 )
Adjusted Net Income 78 98 226 327
Interest expense, net 53 53 160 156
Depreciation and amortization 79 78 240 232
All remaining provision for
income taxes - 19 7 78
Adjusted EBITDA $ 210 $ 248 $ 633 $ 793
Weighted-average number of
common shares outstanding -
basic 164,762,621 163,815,483 164,556,139 165,254,084
Dilutive effect of our employee
compensation plans 1,851,050 1,325,380 1,209,143 2,780,874
Weighted-average number of
common shares outstanding -
diluted 166,613,671 165,140,863 165,765,282 168,034,958
Per share data Basic earnings per share of common stock $ 0.46$ 0.46 $ 1.22$ 1.60 Diluted earnings per share of common stock 0.46 0.46 1.21 1.58 Adjusted basic earnings per share of common stock 0.47 0.60 1.37 1.97 Adjusted diluted earnings per share of common stock 0.47 0.59 1.36 1.94 (1) Includes restructuring, asset-related, and other charges, which are
discussed in further detail in "Note 5 - Restructuring, Asset-related, and
Other Charges" to the Interim Consolidated Financial Statements.
(2) The three and nine months ended
of $9 million recognized in connection with the sale our Repauno, New
Jersey site.
(3) Legal charges pertains to litigation settlements, PFOA drinking water
treatment accruals, and other legal charges. Environmental charges
pertains to management's assessment of estimated liabilities associated
with on-site remediation, off-site groundwater remediation, and toxicity
studies related to
includes
certain estimated liabilities at
ended
for the approved final Consent Order associated with certain matters at
Fayetteville . See "Note 17 - Commitments and Contingent Liabilities" to
the Interim Consolidated Financial Statements for further details.
(4) Includes the removal of certain discrete income tax impacts within our
provision for income taxes, such as shortfalls and windfalls on our
share-based payments, certain return-to-accrual adjustments, historical
valuation allowance adjustments, unrealized gains and losses on foreign
exchange rate changes, and other discrete income tax items.
(5) 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 represent both current and deferred income tax expense or
benefit based on the nature of the non-GAAP financial measure.
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The Chemours Company
The following table sets forth a reconciliation of FCF to our cash flows
provided by (used for) operating activities for the nine months ended September
30, 2020 and 2019.
Nine Months Ended September 30,
(Dollars in millions) 2020 2019
Cash provided by operating activities $ 454 $ 250
Less: Purchases of property, plant, and equipment (214 ) (385 )
Free Cash Flows $ 240 $ (135 )
The following table sets forth a reconciliation of ROIC to Adjusted EBIT and
average invested capital, and their nearest respective GAAP measures, for the
periods presented.
Twelve Months Ended September 30,
(Dollars in millions) 2020 2019
Adjusted EBITDA (1) $ 860 $ 1,134
Less: Depreciation and amortization (1) (318 ) (303 )
Adjusted EBIT $ 542 $ 831
As of September 30,
(Dollars in millions) 2020 2019
Total debt $ 4,095 $ 4,156
Total equity 734 843
Less: Cash and cash equivalents (956 ) (694 )
Invested capital, net $ 3,873 $ 4,305
Average invested capital (2) $ 4,009 $ 4,094
Return on Invested Capital 14 % 20 %
(1) Reconciliations of Adjusted EBITDA to net income (loss) attributable to
Chemours are provided on a quarterly basis. See the preceding table for the
reconciliation of Adjusted EBITDA to net income attributable to Chemours
for the three and nine months ended
(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
