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
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
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
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 coatings, plastics, refrigeration and air conditioning, transportation, semiconductor and consumer electronics, general industrial, mining, and oil and gas. Our principal products include titanium dioxide ("TiO2") pigment, refrigerants, industrial fluoropolymer resins, sodium cyanide, and performance chemicals and intermediates. We manage and report our operating results through four reportable segments: Titanium Technologies, Thermal & Specialized Solutions, Advanced Performance Materials, and Chemical Solutions. 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. Our Thermal & Specialized Solutions segment is a leading, global provider of refrigerants, propellants, blowing agents, and specialty solvents. Our Advanced Performance Materials segment is a leading, global provider of high-end polymers and advanced materials that deliver unique attributes, including low friction coefficients, extreme temperature resistance, weather resistance, ultraviolet and chemical resistance, and electrical insulation. Our Chemical Solutions segment is a leading, North American provider of industrial chemicals used in gold production, industrial, and consumer applications.
We are a different kind of chemistry company, driven by our purpose to create a more colorful, capable, and cleaner world through the power of chemistry. Our world-class product portfolio brings everyday convenience to virtually everything people touch in their daily lives, making our products and the solutions they enable both vital and essential. We are committed to creating value for our customers and stakeholders around the world through the reliable delivery of our high-quality products and services. Our global workforce, renowned for their deep and unmatched expertise, bring our chemistry to life, guided by five values that form the bedrock foundation for how we operate: (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
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The Chemours Company Recent Developments Winter Storm Uri
Over several days in
Coronavirus Disease 2019 ("COVID-19")
The COVID-19 pandemic has, to date, resulted in more than 150 million confirmed infections, over three million deaths, and continues to spread throughout the world. More contagious COVID-19 variants continue to emerge driving up infection rates globally. 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 customer demand for our products, our manufacturing operations, our supply chain effectiveness and efficiencies, 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 throughout the
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. In 2020, we elected to accept
tax relief provided by various taxing jurisdictions, resulting in the deferral
of approximately
Strategic Review of Mining Solutions Business
In
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The Chemours Company
Results of Operations and Business Highlights
Results of Operations
The following table sets forth our results of operations for the three months
ended
Three Months Ended March 31,
(Dollars in millions, except per share amounts) 2021 2020
Net sales $ 1,436 $ 1,305
Cost of goods sold 1,139 1,007
Gross profit 297 298
Selling, general, and administrative expense 139 125
Research and development expense 24 24
Restructuring, asset-related, and other charges (5 ) 11
Total other operating expenses 158 160
Equity in earnings of affiliates 10 8
Interest expense, net (49 ) (54 )
Other income (expense), net 1 (15 )
Income before income taxes 101 77
Provision for (benefit from) income taxes 5 (23 )
Net income 96 100
Net income attributable to Chemours $ 96 $ 100
Per share data
Basic earnings per share of common stock
0.57 0.61
Net Sales The following table sets forth the impacts of price, volume, currency, and
portfolio changes on our net sales for the three months ended
Change in net sales from prior period Three Months EndedMarch 31, 2021 Price (2 )% Volume 11 % Currency 2 % Portfolio (1 )% Total change in net sales 10 %
Our net sales increased by
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") increased by
Selling, General, and Administrative Expense
Our selling, general, and administrative ("SG&A") expense increased by
Research and Development Expense
Our research and development expense was unchanged at
Restructuring, Asset-Related, and Other Charges
Our restructuring, asset-related, and other charges decreased by
Equity in Earnings of Affiliates
Our equity in earnings of affiliates increased by
Interest Expense, Net
Our interest expense, net decreased by
Other Income (Expense), Net
Our other income (expense), net increased by
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The Chemours Company
Provision for (Benefit from) Income Taxes
Our provision for (benefit from) income taxes amounted to a provision for income
taxes of
During the three months ended,
Segment Reviews
During the fourth quarter of 2020, we changed the level of detail at which our Chief Operating Decision Maker ("CODM") regularly reviews and manages certain of our businesses, resulting in the bifurcation of our former Fluoroproducts segment into two standalone reportable segments: Thermal & Specialized Solutions (formerly Fluorochemicals) and Advanced Performance Materials (formerly Fluoropolymers). This change allows us to enhance our customer focus and better align our business models, resources, and cost structure to the specific current and future secular growth drivers of each business, while providing increased transparency to our shareholders. Our historical segment information has been recast to conform to the current segment structure.
Adjusted earnings before interest, taxes, depreciation, and amortization ("Adjusted EBITDA") is the primary measure of segment profitability used by our 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 net income (loss) attributable to Chemours to Adjusted
EBITDA for the three months ended
The following table sets forth our Adjusted EBITDA by segment for the three
months ended
Three Months Ended March 31,
(Dollars in millions) 2021 2020
Titanium Technologies $ 169 $ 138
Thermal & Specialized Solutions 93 88
Advanced Performance Materials 51 52
Chemical Solutions 10 15
Corporate and Other (55 ) (36 )
Total Adjusted EBITDA $ 268 $ 257
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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 months
ended
Three Months Ended March 31,
(Dollars in millions) 2021 2020
Segment net sales $ 723 $ 613
Adjusted EBITDA 169 138
Adjusted EBITDA margin 23 % 23 %
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
months ended
Three Months
Ended March 31 ,
Change in segment net sales from prior period 2021
Price (1 )%
Volume 16 %
Currency 3 %
Portfolio - %
Total change in segment net sales 18 %
Segment Net Sales Our Titanium Technologies segment's net sales increased by
Adjusted EBITDA and Adjusted EBITDA Margin
For the three months ended
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The Chemours Company
Thermal & Specialized Solutions
The following table sets forth the net sales, Adjusted EBITDA, and Adjusted
EBITDA margin amounts for our Thermal & Specialized Solutions segment for the
three months ended
Three Months Ended March 31,
(Dollars in millions) 2021 2020
Segment net sales $ 304 $ 308
Adjusted EBITDA 93 88
Adjusted EBITDA margin 31 % 29 %
The following table sets forth the impacts of price, volume, currency, and
portfolio changes on our Thermal & Specialized Solutions segment's net sales for
the three months ended
Three Months
Ended March 31 ,
Change in segment net sales from prior period 2021
Price (6 )%
Volume 4 %
Currency 1 %
Portfolio - %
Total change in segment net sales (1 )%
Segment Net Sales Our Thermal & Specialized Solutions segment's net sales decreased by
Adjusted EBITDA and Adjusted EBITDA Margin
For the three months ended
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The Chemours Company
Advanced Performance Materials
The following table sets forth the net sales, Adjusted EBITDA, and Adjusted
EBITDA margin amounts for our Advanced Performance Materials segment for the
three months ended
Three Months Ended March 31,
(Dollars in millions) 2021 2020
Segment net sales $ 333 $ 292
Adjusted EBITDA 51 52
Adjusted EBITDA margin 15 % 18 %
The following table sets forth the impacts of price, volume, currency, and
portfolio changes on our Advanced Performance Materials segment's net sales for
the three months ended
Three Months
Ended March 31 ,
Change in segment net sales from prior period 2021
Price (3 )%
Volume 13 %
Currency 4 %
Portfolio - %
Total change in segment net sales 14 %
Segment Net Sales Our Advanced Performance Materials segment's net sales increased by
Adjusted EBITDA and Adjusted EBITDA Margin
For the three months ended
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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 months
ended
Three Months Ended March 31,
(Dollars in millions) 2021 2020
Segment net sales $ 76 $ 92
Adjusted EBITDA 10 15
Adjusted EBITDA margin 13 % 16 %
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
months ended
Three Months
Ended March 31 ,
Change in segment net sales from prior period 2021
Price 1 %
Volume 1 %
Currency - %
Portfolio (19 )%
Total change in segment net sales (17 )%
Segment Net Sales Our Chemical Solutions segment's net sales decreased by
Adjusted EBITDA and Adjusted EBITDA Margin
For the three months ended
Corporate and Other
Corporate and Other costs increased by
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The Chemours Company 2021 Outlook
Our 2021 results will be driven by the following expectations in each of our reportable segments:
• Titanium Technologies - Strong volume growth and improved pricing as we
execute our Ti-PureTM Value Stabilization ("TVS") strategy and experience
improved global economic activity;
• Thermal & Specialized Solutions - Improved customer demand for our
refrigerants, including OpteonTM in mobile and stationary applications,
partially offset by continued headwinds from the illegal import of legacy
HFC refrigerants into the European Union ("EU");
• Advanced Performance Materials - Stronger demand for our polymers across
diverse end-markets, driven by the global economic recovery and secular
growth trends; and,
• Chemical Solutions - Continued strong performance chemical and intermediates
market demand with improved customer demand in mining solutions, driven by
improved mine utilization across the Americas .
We expect that our capital expenditures will be approximately
Our outlook for 2021 reflects our current visibility and expectations based on
market factors, such as currency movements, macro-economic factors, and
end-market demand. In particular, end-market demand may be impacted by factors
beyond our control, including the ongoing COVID-19 pandemic. Our ability to meet
our expectations are subject to numerous risks, including, but not limited to,
those described in Item 1A - Risk Factors within our Annual Report on Form 10-K
for the year ended
Liquidity and Capital Resources
Our primary sources of liquidity are cash generated from operations and
available cash, along with our receivables securitization and borrowings under
our debt financing arrangements, both of which are described in further detail
in "Note 13 - 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 ended
Significant uncertainty continues to exist concerning both the magnitude and the
duration of the impacts to our financial results and condition caused by the
COVID-19 pandemic. Regardless of size and duration, these rapidly evolving
challenges have had and could continue to have an adverse impact on our
operating cash flows. We anticipate that our cash generated from operations,
available cash, receivables securitization, and existing debt financing
arrangements will provide us with sufficient liquidity through at least
At
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The Chemours Company
Over the course of the next 12 months and beyond, we anticipate making significant cash payments for known contractual and other obligations, which we expect to fund through cash generated from operations, available cash, receivables securitization, and our existing debt financing arrangements. Such obligations include:
• Principal and interest obligations on long-term debt - Our principal and
interest obligations on long-term debt at March 31, 2021 did not change
significantly from the obligations previously disclosed in our Annual Report
on Form 10-K for the year ended December 31, 2021 . For a schedule of our
debt principal maturities for the next five years and thereafter, refer to
"Note 13 - Debt" to the Interim Consolidated Financial Statements.
• Operating and finance leases - We lease certain office space, lab space,
equipment, railcars, tanks, barges, tow boats, and warehouses. The majority
of our lease population pertains to operating leases, and the remaining
terms on our total lease population varies, extending up to 19 years. Our
contractual obligations at March 31, 2021 for operating and finance leases
did not significantly change from the obligations previously disclosed in
"Note 14 - Leases" to the Consolidated Financial Statements in our Annual
Report on Form 10-K for the year ended December 31, 2020 .
• Purchase obligations - As part of our normal, recurring operations, we enter
into enforceable and legally-binding agreements to purchase goods and/or
services that specify fixed or minimum quantities, fixed minimum or variable
price provisions, and the approximate timing of the agreement. These
agreements primarily pertain to our purchases of raw materials and utilities
costs and may span multiple years. Our purchase obligations at March 31,
2021 did not significantly change from the purchase obligations previously
disclosed in our Annual Report on Form 10-K for the year ended December 31,
2020 .
• Environmental remediation - We, due to the terms of our Separation-related
agreements with EID, are subject to contingencies pursuant to environmental
laws and regulations that in the future may require further action to
correct the effects on the environment of prior disposal practices or
releases of chemical substances, which are attributable to EID's activities
before our spin-off. Much of this liability results from CERCLA, RCRA, and
similar federal, state, local, and foreign laws. These laws require us to
undertake certain investigative, remediation, and restoration activities at
sites where we conduct or once conducted operations or at sites where waste
generated by us was disposed. At March 31, 2020 , our consolidated balance
sheets include $394 million for environmental remediation liabilities, of
which $83 million was classified as current. Our environmental obligations
at March 31, 2021 did not significantly change from the environmental
obligations previously disclosed in our Annual Report on Form 10-K for the
year ended December 31, 2020 . Pursuant to the binding Memorandum of
Understanding ("MOU") that we entered into with DuPont de Nemours, Inc.
("DuPont"), Corteva, and EID in January 2021 , which is further discussed in
"Note 15 - Commitments and Contingent Liabilities" to the Interim
Consolidated Financial Statements, costs related to potential future legacy
PFAS liabilities arising out of pre-July 1, 2015 conduct will be shared
until the earlier to occur of: (i) December 31, 2040 ; (ii) the day on which
the aggregate amount of Qualified Spend is equal to $4.0 billion ; or, (iii)
a termination in accordance with the terms of the MOU. Qualified Spend is
further described in "Note 15 - Commitments and Contingent Liabilities" to
the Interim Consolidated Financial Statements and is defined in the MOU. The
parties have agreed that, during the term of the cost-sharing arrangement,
we will bear half of the cost of such future potential legacy PFAS
liabilities, and DuPont and Corteva will collectively bear the other half of
the cost of such future potential legacy PFAS liabilities. After the term of
this arrangement, our indemnification obligations under the Separation
Agreement would continue unchanged, subject in each case to certain
exceptions set out in the MOU.
• PFAS escrow funding requirements - Pursuant to the binding MOU that we
entered into with DuPont, Corteva, and EID in January 2021 , which is further
discussed in "Note 15 - Commitments and Contingent Liabilities" to the
Interim Consolidated Financial Statements, the parties have agreed to
establish an escrow account in order to support and manage the payments for
potential future PFAS liabilities. The MOU provides that: (i) no later than
each of September 30, 2021 and September 30, 2022 , we shall deposit $100
million into an escrow account and DuPont and Corteva shall together deposit
$100 million in the aggregate into an escrow account, and (ii) no later than
September 30 of each subsequent year through and including 2028, we shall
deposit $50 million into an escrow account and DuPont and Corteva shall
together deposit $50 million in the aggregate into an escrow account.
Subject to the terms and conditions set forth in the MOU, each party may be
permitted to defer funding in any year (excluding 2021). Additionally, if on
December 31, 2028 , the balance of the escrow account (including interest) is
less than $700 million , we will make 50% of the deposits and DuPont and
Corteva together will make 50% of the deposits necessary to restore the
balance of the escrow account to $700 million . Such payments will be made in
a series of consecutive annual equal installments commencing on September
30, 2029 pursuant to the escrow account replenishment terms as set forth in
the MOU. Any funds that remain in escrow at termination of the MOU will
revert to the party that deposited them. As such, future payments made by us
into the escrow account will remain an asset of Chemours, and such payments
will be reflected as a transfer to restricted cash on our consolidated
balance sheets. No withdrawals are permitted from the escrow account before
January 2026 , except for funding mutually agreed-upon third-party
settlements in excess of $125 million . Starting in January 2026 , withdrawals
may be made from the escrow account to fund Qualified Spend if the parties'
aggregate Qualified Spend in that particular year is greater than $200
million . Starting in January 2031 , the amounts in the escrow account can be
used to fund any Qualified Spend. Future payments from the escrow account
for potential future PFAS liabilities will be reflected on our consolidated
statement of cash flows at that point in time.
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The Chemours Company • Settlement of PFOA MDL litigation - InJanuary 2021 , we and EID entered into settlement agreements with counsel representing the MDL plaintiffs, providing for a settlement of all but one of the 96 filed and pending cases in the MDL, as well as additional pre-suit claims, under which those cases and claims of settling plaintiffs will be resolved for approximately$83 million . During the first quarter of 2021 we made payments of$7 million associated with the Second MDL Settlement. AtMarch 31, 2021 ,$22 million was accrued associated with this matter, which was subsequently paid in April of 2021. For further details related to this matter, refer to "Note 15 - Commitments and Contingent Liabilities" to the Interim Consolidated Financial Statements. • Purchases of property, plant, and equipment - Our operations are capital intensive, requiring ongoing investment to upgrade or enhance existing operations and to meet environmental and operational regulations. For the three months endedMarch 31, 2021 and 2020, our purchases of property, plant, and equipment amounted to$60 million and$106 million , respectively. Our expectations for capital expenditures for the year endingDecember 31, 2021 , did not significantly change from the amount previously disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2020 .
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 least
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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 three months ended
Three Months Ended March 31,
(Dollars in millions) 2021 2020
Cash provided by operating activities $ 39 $ 44
Cash used for investing activities (77 ) (112 )
Cash used for financing activities (42 ) (155 )
Operating Activities
We generated
Investing Activities
We used
Financing Activities
We used
We used
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The Chemours Company
Current Assets
The following table sets forth the components of our current assets at March 31,
2021 and December 31, 2020 .
(Dollars in millions) March 31, 2021 December 31, 2020
Cash and cash equivalents $ 1,008 $ 1,105
Accounts and notes receivable, net 723 511
Inventories 988 939
Prepaid expenses and other 67 78
Total current assets $ 2,786 $ 2,633
Our accounts and notes receivable, net increased by
Our inventories increased by
Our prepaid expenses and other assets decreased by
Current Liabilities
The following table sets forth the components of our current liabilities at
(Dollars in millions) March 31, 2021 December 31, 2020 Accounts payable $ 976 $ 844 Short-term and current maturities of long-term debt 23 21 Other accrued liabilities 502 577 Total current liabilities $ 1,501 $ 1,442
Our accounts payable increased by
Our short-term and current maturities of long-term debt were largely unchanged
at
Our other accrued liabilities decreased by
Credit Facilities and Notes
See "Note 13 - 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 ended
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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 7.000% senior unsecured notes due
Our summarized financial information is presented on a combined basis,
consisting of the Parent Issuer and Guarantor Subsidiaries (collectively, the
"
(Dollars in millions) Three Months Ended March 31, 2021 Net sales $ 930 Gross profit 101 Loss before income taxes (27 ) Net loss (17 ) Net loss attributable to Chemours (17 ) (Dollars in millions) March 31, 2021 December 31, 2020 Assets Current assets (1,2,3) $ 1,228 $ 1,057 Long-term assets (4) 3,936 4,288 Liabilities Current liabilities (2) $ 1,138 $ 1,298 Long-term liabilities 4,685 4,703 (1) Current assets includes$215 million and$283 million of cash and cash equivalents atMarch 31, 2021 andDecember 31, 2020 , respectively. (2) Current assets includes$468 million and$236 million of intercompany accounts receivable from the Non-Guarantor Subsidiaries atMarch 31, 2021 andDecember 31, 2020 , respectively. Current liabilities includes$213 million and$388 million of intercompany accounts payable to the Non-Guarantor Subsidiaries atMarch 31, 2021 andDecember 31, 2020 , respectively. (3) As ofMarch 31, 2021 andDecember 31, 2020 ,$110 million and$33 million of accounts receivable generated by theObligor Group , respectively, remained outstanding with one of the Non-Guarantor Subsidiaries under the Securitization Facility. (4) Long-term assets includes$891 million and$1.2 billion of intercompany notes receivable from the Non-Guarantor Subsidiaries atMarch 31, 2021 andDecember 31, 2020 .
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.
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. At
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The Chemours Company
Off-Balance Sheet Arrangements
In
See "Note 13 - 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 ended
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 EID and its
subsidiaries that we may be required to indemnify pursuant to the
Separation-related agreements executed prior to our separation from EID on
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.
At
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 EID pursuant to the Separation-related agreements, we and EID 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
Some remediation sites will achieve site closure and will require no further action to protect people and the environment and comply with laws and regulations. At certain sites, we expect that there will continue to be some level of remediation activity due to ongoing OM&M of remedial systems. In addition, portfolio changes, such as an acquisition or divestiture, or notification as a PRP for a multi-party Superfund site, could result in additional remediation activity and potentially additional accrual.
Management does not believe that any loss, in excess of amounts accrued, related to remediation activities at any individual site will have a material impact on our financial position or cash flows for any given year, as such obligation can be satisfied or settled over many years.
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The Chemours Company
Significant Environmental Remediation Sites
While there are many remediation sites that contribute to our total accrued
environmental remediation liabilities at
(Dollars in millions) March 31, 2021 December 31, 2020 Chambers Works, Deepwater, New Jersey $ 27 $ 20 East Chicago, Indiana 11 11 Fayetteville Works, Fayetteville, North Carolina 191 194 Pompton Lakes, New Jersey 41 42 USS Lead, East Chicago, Indiana 12 12 All other sites 112 111 Total environmental remediation $ 394 $ 390
The five sites listed above represent 72% of our total accrued environmental
remediation liabilities at
Chambers Works,
The Chambers Works complex is located on the eastern shore of the
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. In the first quarter of 2021, in connection with ongoing discussions
with
East Chicago, Indiana
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 the
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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 the
On
Fayetteville Works,
Beginning in 1996, several stages of site investigation were conducted under
oversight by the
As discussed in "Note 15 - Commitments and Contingent Liabilities" to the
Interim Consolidated Financial Statements, we, along with NC DEQ and
In
As of
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The Chemours Company Pompton Lakes, New Jersey
During the 20th century, blasting caps, fuses, and related materials were
manufactured at
The USS Lead Superfund site was listed on the National Priorities List in 2009.
To facilitate negotiations with PRPs, the
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. The
In
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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 - through 10 ambitious goals targeted for completion by 2030. In
•Reduce absolute operations Scope 1 and Scope 2 greenhouse gas ("GHG") emissions by 60%;
•Reduce air and water process emissions of fluorinated organic chemicals by 99% or more; and,
•Reduce our landfill volume intensity by 70%.
These goals are designed to promote accountability to our commitment and
position us for sustainable, long-term earnings growth. We understand that
maintaining safe, sustainable operations has an impact on us, our communities,
the environment, and our collective future. With this focus, we continue to
enhance emission control technologies at our manufacturing sites, drive energy
efficiency improvements across our operations, and pursue opportunities to power
our operations with low
Consistent with our Corporate Responsibility Commitment, we believe that climate
change is an important global issue that presents both opportunities and
challenges for our company, our partners, and our communities. Climate change
matters for our company are likely to be driven by changes in physical climate
parameters, regulations and/or public policy, and changes in technology and
product demand. Our operations and business results are increasingly subject to
evolving climate-related legislation and regulations. Our business segments
conduct market trend impact assessments, continuously evaluate opportunities for
existing and new products and offerings, and are well-positioned to take
advantage of opportunities that may arise from increased consumer demand for
and/or legislation mandating or incentivizing the use of products and
technologies necessary to achieve a low-
As an energy and emissions intensive company, our costs of complying with
complex environmental laws, regulations, and enforcements, as well as internal
and external voluntary programs, are significant and will continue to be
significant for the foreseeable future. These laws, regulations, and
enforcements may change and could become more stringent over time. Additionally,
significant regional or national differences in approaches to the imposition of
such regulations and restrictions could present competitive challenges in a
global marketplace. Furthermore, the recent change in the
PFOA
See our discussion under the heading "PFOA" in "Note 15 - Commitments and Contingent Liabilities" to the Interim Consolidated Financial Statements.
GenX
In
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The Chemours Company PFAS
In
In
Non-GAAP Financial Measures
We prepare our interim consolidated financial statements in accordance with
generally accepted accounting principles in the
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. Net Leverage Ratio is defined as our total debt principal, net, or our total debt principal outstanding less cash and cash equivalents, divided by Adjusted EBITDA.
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, ROIC,
and Net Leverage Ratio 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
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The Chemours Company
The following table sets forth a reconciliation of our net income (loss)
attributable to Chemours to Adjusted Net Income, Adjusted EBITDA, and Adjusted
EPS for the three months ended
Three Months Ended March 31,
(Dollars in millions, except per share
amounts) 2021 2020
Net income attributable to Chemours $ 96 $ 100
Non-operating pension and other
post-retirement employee benefit income (1 ) -
Exchange losses, net 8 24
Restructuring, asset-related, and other
charges (1) (5 ) 11
Natural disasters and catastrophic events (2) 16 -
Transaction costs 4 2
Legal and environmental charges (3,4) 13 10
Adjustments made to income taxes (5) - (19 )
Benefit from income taxes relating to
reconciling items (6) (11 ) (10 )
Adjusted Net Income 120 118
Interest expense, net 49 54
Depreciation and amortization 83 79
All remaining provision for income taxes 16 6
Adjusted EBITDA $ 268 $ 257
Weighted-average number of common shares
outstanding - basic 165,652,778 164,247,449
Dilutive effect of our employee compensation
plans 3,397,544 1,010,542
Weighted-average number of common shares
outstanding - diluted 169,050,322 165,257,991
Per share data
Basic earnings per share of common stock $ 0.58 $ 0.61
Diluted earnings per share of common stock 0.57 0.61
Adjusted basic earnings per share of common
stock 0.72 0.72
Adjusted diluted earnings per share of common
stock 0.71 0.71
(1) Includes restructuring, asset-related, and other charges, which are
discussed in further detail in "Note 4 - Restructuring, Asset-related, and
Other Charges" to the Interim Consolidated Financial Statements.
(2) Natural disasters and catastrophic events pertains to the total cost of
plant repairs and utility charges in excess of historical averages caused
by Winter Storm Uri.
(3) Legal charges pertains to litigation settlements, PFOA drinking water
treatment accruals, and other legal charges. See "Note 15 - Commitments
and Contingent Liabilities" to the Interim Consolidated Financial
Statements for further details.
(4) In 2020, environmental charges pertains to management's assessment of
estimated liabilities associated with on-site remediation, off-site
groundwater remediation, and toxicity studies related to Fayetteville . The
three months ended March 31, 2020 includes $8 million in additional
charges related to the approved final Consent Order associated with
certain matters at Fayetteville . See "Note 15 - Commitments and Contingent
Liabilities" to the Interim Consolidated Financial Statements for further
details.
(5) 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, valuation
allowance adjustments, unrealized gains and losses on foreign exchange
rate changes, and other discrete income tax items.
(6) 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 our cash flows provided by
(used for) operating activities to FCF for the three months ended March 31, 2021
and 2020.
Three Months Ended March 31,
(Dollars in millions) 2021 2020
Cash provided by operating activities $ 39 $ 44
Less: Purchases of property, plant, and
equipment (1) (60 ) (106 )
Free Cash Flows $ (21 ) $ (62 )
(1) The three months ended March 31, 2021 includes $22 million related to
construction-in-progress assets acquired in exchange for the termination
of a contract with a third-party service provider at our
under-construction Mining Solutions facility in Gomez Palacio, Durango,
Mexico .
The following table sets forth a reconciliation of Adjusted EBIT and average
invested capital, and their nearest respective GAAP measures, to ROIC for the
periods presented.
Twelve months Ended March 31,
(Dollars in millions) 2021 2020
Adjusted EBITDA (1) $ 890 $ 1,015
Less: Depreciation and amortization (1) (324 ) (313 )
Adjusted EBIT $ 566 $ 702
As of March 31,
(Dollars in millions) 2021 2020
Total debt $ 3,993 $ 4,034
Total equity 852 661
Less: Cash and cash equivalents (1,008 ) (714 )
Invested capital, net $ 3,837 $ 3,981
Average invested capital (2) $ 3,880 $ 4,140
Return on Invested Capital 15 % 17 %
(1) Reconciliations of net income (loss) attributable to Chemours to Adjusted
EBITDA are provided on a quarterly basis. See the preceding table for the
reconciliation of net income (loss) attributable to Chemours to Adjusted
EBITDA for the three months ended March 31, 2021 and 2020.
(2) Average invested capital is based on a five-quarter trailing average of
invested capital, net.
The following table sets forth a reconciliation of our total debt principal, cash and cash equivalents, and Adjusted EBITDA to Net Leverage Ratio.
As of March 31,
(Dollars in millions) 2021 2020
Total debt principal $ 4,027 $ 4,069
Less: Cash and cash equivalents (1,008 ) (714 )
Total debt principal, net $ 3,019 $ 3,355
Twelve months Ended March 31,
(Dollars in millions) 2021 2020
Adjusted EBITDA (1) $ 890 $ 1,015
Net Leverage Ratio 3.4 3.3
(1) Reconciliations of net income (loss) attributable to Chemours to Adjusted
EBITDA are provided on a quarterly basis. See the preceding table for the
reconciliation of net income (loss) attributable to Chemours to Adjusted
EBITDA for the three months ended March 31, 2021 and 2020.
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