THE CHEMOURS COMPANY
2016 ANNUAL REPORT
Reinvigorated.
A year of transformation.
A Note
from Richard and Mark
Fellow Shareholders,
For Chemours, 2016 was about transformation.
2016 financial and
business performance
results:
Financial Achievements
• Earned Adjusted EBITDA* of $822
million and Net Income of $7 million
• Reduced structural cost by
In our first full year as an independent corporation, we achieved robust financial results
~$200 million
through an intense focus on business factors we could control, despite market challenges,
financial headwinds, and inherited obstacles. At the same time, we made great strides
establishing our own identity, staying true to our values, and setting ourselves up for
sustained growth and solid performance well into the future.
Our steady improvement was guided by a five-point transformation plan that kept our
attention on critical objectives, such as structural cost reductions, portfolio optimization,
and refocusing our investments where we enjoy market advantages and growth opportunities.
We began the process of creating a Chemours culture that reflects our corporate values:
Customer Centered, Refreshing Simplicity, Collective Entrepreneurship, Safety Obsession,
and Unshakable Integrity.
And we made measurable progress on every front. Through the unwavering commitment
of our talented workforce, Chemours has become a more decisive, nimble, and responsive
company, working at a faster pace to meet the needs of customers and shareholders alike.
We have highlighted some of our 2016 financial and business performance results in the
column on the right.
By any account, Chemours is a different company today than it was a year ago. We delivered
on our promises. And we intend for that to become a pattern.
Looking to 2017, we’ll continue to execute our transformation plan to become a Higher
Value Chemistry company that benefits shareholders, customers, employees, and society
at large by harnessing the power of chemistry to help make the world cleaner, more
colorful, and more capable.
Best regards,
Richard H. Brown
Chairman of the Board
Mark P. Vergnano
President and Chief Executive Officer
• Improved operating cash flow
to $594 million, an increase of
~$412 million over 2015
• Generated ~$685 million in gross
proceeds from the Chemical
Solutions divestiture, an implied
10 to 12x EBITDA multiple on
related earnings
• Retired $385 million in debt to get
us to a net leverage ratio of ~3.3x
• Delivered one-year total
shareholder return of 317%
Business Enhancements
• Continued ramp-up, market
adoption, and capacity
expansion of Opteon™ YF—our
low global warming potential
(GWP) refrigerant; by the end of
2017 more than 50 million cars
worldwide will use an HFO low
GWP refrigerant
• Completed titanium dioxide
(TiO2) capacity expansion at our
Altamira, Mexico, plant—one of
the lowest-cost and most capable
TiO2 plants in the world
• Successfully concluded a
comprehensive review and
restructure of our Chemical
Solutions business portfolio
• Launched multiple game-
changing new products, such
as Teflon EcoElite™—a new,
renewably sourced product from
our Fluoroproducts business
• Began construction of a
new $300 million facility for
manufacturing Opteon™ low GWP
products in Corpus Christi, Texas
* See reconciliation of Net Income to Adjusted
EBITDA on page 60 of the Form 10-K.
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1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
OR
Commission File Number 001-36794
The Chemours Company
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or other Jurisdiction of Incorporation or Organization)
46-4845564
(I.R.S. Employer Identification No.)
1007 Market Street, Wilmington, Delaware 19899
(Address of Principal Executive Offices)
Registrant’s Telephone Number: (302) 773-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Name of Exchange on Which Registered
Common Stock ($.01 par value)
New York Stock Exchange
Securities are registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant is a well-known seasoned issuer (as defined in Rule 405 of
Yes ☒ No ☐
the Securities Act).
Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of
Yes ☐ No ☒
the Act.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of common stock held by non-affiliates of the registrant as of June 30, 2016, the last business day of the
registrant’s most recently completed second fiscal quarter, was approximately $1.5 billion. As of February 14, 2017, 183,153,218 shares
of the company’s common stock, $0.01 par value, were outstanding.
Portions of the registrant’s definitive proxy statement relating to its 2017 annual meeting of shareholders (2017 Proxy Statement) are
incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 2017 Proxy Statement will be filed with
the U. S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.
Documents Incorporated by Reference
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A RGS 2
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A Magenta
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A RGS 3
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A RGS 5
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A RGS 6
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A RGS 4
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A RGS 1
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A Yellow
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A Black
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A Cyan
] 16 Page
DTP SB Hcho 8.25 x 10.75 (35) .25 HT
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Condensed Consolidating Statements of Cash Flows
Year Ended December 31, 2016
Guarantor
Guarantor
and
Non-
Eliminations
Subsidiaries
Subsidiaries
Adjustments
Consolidated
Parent
Issuer
Cash (used for) provided by operating activities . . . . . . .
$
(176) $
355
$
415
$
— $
594
Operating activities
Investing activities
Purchases of property, plant and equipment . . . . . . . . . . .
Proceeds from sales of assets, net . . . . . . . . . . . . . . . . .
Intercompany investing activities . . . . . . . . . . . . . . . . . .
Foreign exchange contract settlements . . . . . . . . . . . . . .
Investment in affiliates . . . . . . . . . . . . . . . . . . . . . . . . .
Cash (used for) provided by investing activities . . . . . . . .
Financing activities
Debt repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of stock options . . . . . . . . . . . . .
Cash provided by (used for) financing activities . . . . . . .
Effect of exchange rate changes on cash . . . . . . . . . . . . . .
Increase in cash and cash equivalents . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year
. . . . . . .
—
—
—
—
—
—
(369)
(22)
(4)
11
176
—
—
—
(233)
591
(560)
(12)
—
(214)
(12)
—
—
—
(12)
—
129
95
(105)
117
—
—
(1)
11
—
—
—
—
—
(19)
407
271
678
560
—
—
—
—
560
—
—
—
—
—
—
—
(560)
(338)
708
—
(12)
(1)
357
—
(381)
(22)
(4)
11
(396)
(19)
536
366
902
Cash and cash equivalents at end of year . . . . . . . . . . . .
$
— $
224
$
$
— $
Intercompany short-term borrowings, net . . . . . . . . . . . . .
$
560
$
— $
— $
(560) $
The Chemours Company
Table of Contents
Part I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Officers of the Registrant
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Historical Consolidated Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . .
Part II
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part III
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . .
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part IV
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
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149996_85669 Chemours Company Annual Report_Text Signature 1 Side B RGS 3
149996_85669 Chemours Company Annual Report_Text Signature 1 Side B RGS 2
149996_85669 Chemours Company Annual Report_Text Signature 1 Side B RGS 1
149996_85669 Chemours Company Annual Report_Text Signature 1 Side B Yellow
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149996_85669 Chemours Company Annual Report_Text Signature 1 Side B Cyan
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The Chemours Company
Forward-Looking Statements
This section and other parts of this Annual Report on Form 10-K contain forward-looking statements, within the meaning of the
federal securities law, 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. Factors that could cause or contribute to these differences
include those discussed below and in the Item 1A, “Risk Factors”.
Forward-looking statements are based on certain assumptions and expectations of future events which may not be accurate or
realized. Forward-looking statements also involve risks and uncertainties, many of which are beyond Chemours’ control.
Important factors that may materially affect such forward-looking statements and projections include:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Fluctuations in energy and raw material prices;
Failure to develop and market new products and optimally manage product life cycles;
Our substantial indebtedness and availability of borrowing facilities, including access to our revolving credit facilities;
Uncertainty regarding the availability of additional financing in the future, and the terms of such financing;
Negative rating agency actions;
Significant litigation and environmental matters, including indemnifications we were required to assume;
Failure to appropriately manage process safety and product stewardship issues;
Changes in laws and regulations or political conditions;
Global economic and capital markets conditions, such as inflation,
commodity prices, as well as regulatory requirements;
Currency related risks;
Business or supply disruptions and security threats, such as acts of sabotage, terrorism or war, weather events and
natural disasters;
Ability to protect, defend and enforce Chemours’ intellectual property rights;
Increased competition and increasing consolidation of our core customers;
Changes in relationships with our significant customers and suppliers;
Significant or unanticipated expenses, including but not limited to litigation or legal settlement expenses;
Our ability to predict, identify and interpret changes in consumer preference and demand;
Our ability to realize the expected benefits of the Separation (as defined elsewhere in this Annual Report);
Our ability to complete potential divestitures or acquisitions and our ability to realize the expected benefits of
divestitures or acquisitions if they are completed;
Our ability to deliver cost savings as anticipated, whether or not on the timelines proposed;
Our ability to pay a dividend and the amount of any such dividend declared; and
Disruptions in our information technology networks and systems.
interest and currency exchange rates, and
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. The Company assumes no obligation to revise or update any forward-looking
statement for any reason, except as required by law.
Unless the context otherwise requires, references herein to “The Chemours Company”, “The Chemours Company, LLC”,
“Chemours”, “the Company”, “our company”, “we”, “us”, and “our” refer to The Chemours Company and its consolidated
subsidiaries. References herein to “DuPont” refers to E.I. du Pont de Nemours and Company, a Delaware corporation, and its
consolidated subsidiaries (other than Chemours and its consolidated subsidiaries), unless the context otherwise requires.
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Condensed Consolidating Balance Sheets
Year Ended December 31, 2015
Guarantor
Guarantor
and
Non-
Eliminations
Subsidiaries
Subsidiaries
Adjustments
Consolidated
Parent
Issuer
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . .
$
— $
95
$
$
— $
Assets
Current assets:
Accounts and notes receivable – trade, net
. . . . . . . . . . .
Intercompany receivable . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other
. . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment
. . . . . . . . . . . . . . . . . . . . .
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . .
Net property, plant and equipment . . . . . . . . . . . . . . . .
Goodwill and other intangible assets, net
. . . . . . . . . . . . . .
Investments in affiliates . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany notes receivable . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities and equity
Current liabilities:
Short-term borrowings and current maturities of long-term
debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany payable . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,913
Intercompany notes payable . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingent liabilities
Equity
Total Chemours stockholders’ equity . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
3
—
—
3
—
—
—
—
—
3,105
1,150
19
15
202
21
238
—
—
—
126
—
126
344
459
493
49
1,440
7,070
(4,899)
2,171
151
9
—
—
275
1,002
24
54
287
2
—
173
456
2,413
—
2,413
271
515
54
501
52
1,393
1,945
(939)
1,006
25
127
—
—
214
—
260
146
742
—
61
97
711
4
715
—
(516)
(22)
(535)
3
—
—
—
—
—
—
(3,105)
(1,150)
(516)
(516)
—
—
—
—
—
(3,124)
—
(3,124)
1,150
(1,150)
366
859
—
972
104
2,301
9,015
(5,838)
3,177
176
136
—
—
508
6,298
973
39
—
454
1,466
3,915
—
234
553
126
4
130
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,277
$
4,046
$
2,765
$
(4,790)
$
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $
637
$
336
$
— $
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,151
1,633
2,050
(1,666)
6,168
Total liabilities and equity . . . . . . . . . . . . . . . . . . .
$ 4,277
$
4,046
$
2,765
$
(4,790)
$
6,298
2
F-55
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A RGS 3
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A RGS 1
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A RGS 6
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149996_85669 Chemours Company Annual Report_Text Signature 1 Side A RGS 4
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A RGS 5
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A Magenta
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A Yellow
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A Black
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A Cyan
] 16 Page
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DTP SB Hcho 8.25 x 10.75 (35) .25 HT
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149996_85669 Chemours Company Annual Report_Text Signature 1 Side A Magenta
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A RGS 4
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A RGS 3
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A RGS 2
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149996_85669 Chemours Company Annual Report_Text Signature 1 Side A RGS 5
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149996_85669 Chemours Company Annual Report_Text Signature 1 Side A Black
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A Cyan
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Condensed Consolidating Balance Sheets
Year Ended December 31, 2016
Guarantor
Guarantor
and
Non-
Eliminations
Subsidiaries
Subsidiaries
Adjustments
Consolidated
Parent
Issuer
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,424
$
4,137
$
3,049
$
(5,550)
$
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . .
$
— $
$
$
— $
Assets
Current assets:
Accounts and notes receivable – trade, net
. . . . . . . . . . .
Intercompany receivable . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other
. . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment
. . . . . . . . . . . . . . . . . . . . .
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . .
Net property, plant and equipment . . . . . . . . . . . . . . . .
Goodwill and other intangible assets, net
. . . . . . . . . . . . . .
Investments in affiliates . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany notes receivable . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities and equity
Current liabilities:
Short-term borrowings and current maturities of long-term
debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany payable . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,526
Intercompany notes payable . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingent liabilities
Equity
Total Chemours stockholders’ equity . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
3
—
—
3
—
—
—
—
—
3,258
1,150
13
15
762
21
798
—
—
—
100
—
100
224
299
1,050
341
38
1,952
6,136
(4,285)
1,851
156
—
—
—
178
—
46
718
1,337
3
—
59
428
1,827
2,310
—
2,310
1,740
1,861
(928)
678
508
46
476
32
933
14
136
—
—
226
—
291
133
735
—
73
96
991
4
995
—
(1,099)
(50)
7
(1,142)
(3,258)
(1,150)
(1,099)
(1,099)
—
—
—
—
—
—
—
—
—
—
—
(3,301)
—
(3,301)
1,150
(1,150)
902
807
—
767
77
2,553
7,997
(5,213)
2,784
170
136
—
—
417
6,060
884
15
—
872
1,771
3,529
—
132
524
100
4
104
Total liabilities and equity . . . . . . . . . . . . . . . . .
$ 4,424
$
4,137
$
3,049
$
(5,550)
$
6,060
The Chemours Company
PART I
Item 1. BUSINESS
Overview
The Chemours Company is a leading global provider of performance chemicals. We began operating as an independent company on
July 1, 2015 (the Separation Date) after separating from E. I. du Pont de Nemours and Company (DuPont) (the Separation). Our
company is comprised of three reportable segments: Titanium Technologies, Fluoroproducts and Chemical Solutions. Our Titanium
Technologies segment is the leading global producer of titanium dioxide (TiO2), a premium white pigment used to deliver whiteness,
brightness, opacity and protection in a variety of applications. 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, oil and gas, water treatment and other industries.
Effective prior to the opening of trading on the New York Stock Exchange (NYSE) on July 1, 2015, DuPont completed the separation of
the businesses comprising DuPont’s Performance Chemicals reporting segment, and certain other assets and liabilities, into Chemours,
a separate and distinct public company. The separation was completed by way of a distribution of all of the then-outstanding shares of
common stock of Chemours through a dividend in kind of Chemours’ common stock (par value $0.01) to holders of DuPont common
stock (par value $0.30) as of the close of business on June 23, 2015 (the Record Date) (the transaction is referred to herein as the
Distribution).
On the Separation Date, each holder of DuPont’s common stock received one share of Chemours’ common stock for every five shares
of DuPont’s common stock held on the Record Date. The Separation was completed pursuant to a separation agreement and other
agreements with DuPont, including an employee matters agreement, a tax matters agreement, a transition services agreement and an
intellectual property cross-license agreement. These agreements govern the relationship between Chemours and DuPont following the
separation and provided for the allocation of various assets,
liabilities, rights and obligations. These agreements also included
arrangements for transition services provided by DuPont to Chemours that were substantially completed during 2016.
We operate 26 production facilities located in 10 countries and serve over 3,800 customers across a wide range of end markets in more
than 130 countries. The following chart illustrates the global sales of our businesses for the years ended December 31, 2016, 2015, and
2014:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $
573
$
311
$
— $
Sales by Region
50%
40%
30%
20%
10%
0%
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,324
2,054
(2,249)
5,956
North America
Asia Pacific
EMEA
Latin America
2016
2015
2014
Chemours is committed to creating value for our customers through the reliable delivery of high quality products and services around
the globe. We create value for customers and stockholders through (i) operational excellence and asset efficiency, which includes our
commitment to safety and environmental stewardship, (ii) strong customer focus to produce innovative, high-performance products, (iii)
focus on cash flow generation through optimization of our cost structure, and improvement in working capital and supply chain
efficiencies through our transformation plan (described below), (iv) organic growth and inorganic expansions to current business and (v)
creation of an organization that
is committed to our corporate values of safety, customer appreciation, simplicity, collective
entrepreneurship and integrity.
Many of Chemours’ commercial and industrial relationships span decades. Our customer base includes a diverse set of companies,
many of which are leaders in their respective industries. Our sales are not materially dependent on any single customer. As of
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149996_85669 Chemours Company Annual Report_Text Signature 1 Side B Magenta
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149996_85669 Chemours Company Annual Report_Text Signature 1 Side B RGS 5
149996_85669 Chemours Company Annual Report_Text Signature 1 Side B RGS 3
149996_85669 Chemours Company Annual Report_Text Signature 1 Side B RGS 4
149996_85669 Chemours Company Annual Report_Text Signature 1 Side B RGS 1
149996_85669 Chemours Company Annual Report_Text Signature 1 Side B Yellow
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149996_85669 Chemours Company Annual Report_Text Signature 1 Side B Cyan
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Condensed Consolidating Statements of Comprehensive Income (Loss)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $
4,593
$
$
(1,883)
$
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,863
(1,884)
Gross profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . .
Research and development expense . . . . . . . . . . . . . . . . .
Restructuring and asset related charges, net . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliates . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of subsidiaries . . . . . . . . . . . . . . . . . . .
Other income (expense), net
. . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net income attributable to noncontrolling interests . . . .
Net income attributable to Chemours . . . . . . . . . . . . . . .
Comprehensive income attributable to Chemours . . . . . . . . .
Year Ended December 31, 2014
Guarantor
Guarantor
and
Non-
Eliminations
Subsidiaries
Subsidiaries
Adjustments
Consolidated
Parent
Issuer
—
—
—
—
—
—
—
400
—
400
—
400
—
400
400
3,722
3,093
629
256
16
10
282
20
—
306
76
230
1
229
229
(61)
730
429
127
11
567
—
—
80
243
75
168
—
168
168
1
—
—
—
—
—
—
(400)
(399)
(2)
(397)
—
(397)
(397)
6,432
5,072
1,360
685
143
21
849
20
—
19
550
149
401
1
400
400
$
$
$
$
$
$
$
$
$
$
The Chemours Company
December 31, 2016, no one individual customer balance represented more than five percent of Chemours’ total outstanding receivables
balance and no one individual customer represented more than ten percent of our sales.
Chemours Five-Point Transformation Plan
Following the Separation, Chemours developed a Five-Point Transformation Plan to address changes to our organization, cost structure
and portfolio of businesses. We have made considerable progress on our transformation plan throughout 2016, with additional cost
reductions and growth targeted in 2017.
The objectives of our multi-year five-point transformation plan are to improve our financial performance, streamline and strengthen our
portfolio and reduce our leverage by:
1. Reducing our costs through a simpler business model;
2. Optimizing our portfolio to focus on our businesses where we have leading positions;
3. Growing our market positions where we have competitive advantages;
4. Refocusing our investments by concentrating our capital expenditures on our core businesses; and
5.
Enhancing our organization to deliver our values and support our transformation to a higher-value chemistry company.
Through cost reduction and growth, Chemours expects the transformation plan to deliver $500 million of incremental Adjusted EBITDA
improvement over 2015 through 2017. Based on our anticipated cost reduction and growth initiatives, we expect that our cost savings of
approximately $350 million and approximately $150 million in improvements from growth initiatives will also improve our pre-tax
earnings by similar amounts over 2015 through 2017. These improvements will be partially offset by the impact of divestitures
completed during 2016, unfavorable price and mix of fluoropolymer products and may also be impacted by market factors. For the year
ended December 31, 2016, we had a pre-tax loss and Adjusted EBITDA of $11 million and $822 million, respectively, compared to a
pre-tax loss of $188 million and adjusted EBITDA of $573 million for the year ended December 31, 2015. Our 2016 pre-tax loss
includes net gain from divestitures of approximately $254 million offset by $335 million litigation accrual related to the PFOA MDL
Settlement (see Item 3. Legal Proceedings, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations, and Note 20 to the Consolidated Financial Statements included elsewhere in this Annual Report).
Through a combination of higher cash flow from operations, lower capital spending, and proceeds from asset sales, we anticipate
reducing our leverage ratio (net debt to Adjusted EBITDA) to approximately three times by the end of 2017. As of December 31, 2016,
our leverage ratio is approximately 3.3 times.
Adjusted EBITDA is a non-GAAP financial measure. For a discussion of our use of non-GAAP financial measures and reconciliations to
the closest GAAP financial measures, see Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of
Operations — Non-GAAP Financial Measures.
Segments
In our Titanium Technologies segment, we have a long-standing history of delivering high-quality TiO2 pigment using our proprietary
chloride technology. We are the largest global producer of TiO2, and our low-cost network of manufacturing facilities allows us to
efficiently and cost-effectively serve our global customer base. During 2016, we further enhanced our operating cost advantage with the
startup of our second production line at our Altamira, Mexico facility. Chemours is well positioned to remain one of the lowest cost TiO2
producers and continue to meet our customers’ growing needs around the world.
In our Fluoroproducts segment, we are one of two globally integrated producers making both fluorochemicals and fluoropolymers. In
Fluorochemicals, we expect to see increased adoption of Opteon™, the world’s lowest global warming potential refrigerant, as
governments around the world pass legislation that makes the use of low global warming potential refrigerants a requirement. Our
fluoropolymers offerings provide customers with tailored products that have unique properties,
including very high temperature
resistance and high chemical resistance. We will continue to invest in research and development to remain a leader in these areas, and
ensure that we are able to meet our customers’ needs as regulations change.
In our Chemical Solutions segment, we completed our strategic review of our portfolio in 2016, including the announced sales of the
Beaumont Aniline facility, Clean & Disinfect business, and Sulfur products business, and ceased production at our Reactive Metals
Solutions (RMS) facility in Niagara Falls, New York. We remain committed to retaining and improving our Mining Solutions
4
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Gross profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . .
Research and development expense . . . . . . . . . . . . . . . . .
Restructuring and asset related charges, net . . . . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliates . . . . . . . . . . . . . . . . . . . . . .
Equity in (net loss) earnings of subsidiaries . . . . . . . . . . . . .
Interest expense, net
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany interest income (expense), net . . . . . . . . . . . .
Other income (expense), net
. . . . . . . . . . . . . . . . . . . . . .
(Loss) income before income taxes . . . . . . . . . . . . . . . .
(136)
(Benefit from) provision for income taxes . . . . . . . . . . . . . . .
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net income attributable to noncontrolling interests . . . .
—
—
15
—
—
—
15
—
44
13
(47)
(131)
(46)
(90)
—
336
426
95
295
25
841
1
—
(1)
—
92
(413)
(89)
(324)
—
(13)
1,087
3,269
2,650
619
204
244
2
38
—
21
—
—
(44)
(31)
321
40
281
—
281
29
(1,596)
—
(13)
—
—
—
—
47
—
—
(20)
40
(3)
43
—
43
295
5,717
4,762
955
632
97
333
25
(132)
22
—
—
54
(188)
(98)
(90)
—
(90)
(334)
Net (loss) income attributable to Chemours . . . . . . . . . . .
(90) $
(324) $
Comprehensive (loss) income attributable to Chemours . . . . .
(334) $
(324) $
$
$
$
$
$
$
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Condensed Consolidating Statements of Comprehensive Income (Loss)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $
4,044
$
$
(1,596)
$
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,708
Year Ended December 31, 2015
Guarantor
Guarantor
and
Non-
Eliminations
Subsidiaries
Subsidiaries
Adjustments
Consolidated
Parent
Issuer
The Chemours Company
business (previously known as Cyanides business) and the product lines at our Belle, West Virginia site. We are investing in our Mining
Solutions business during 2017 and 2018 to increase our capacity by approximately 50 percent. This additional capacity will allow us to
serve the growing demand for sodium cyanide in the gold mining industry in the Americas.
We will maintain our commitment to responsible stewardship and safety for our employees, customers and the communities where we
operate. Meeting and exceeding our customers’ expectations while conducting business in accordance with our high ethical standards
will continue to be a primary focus for our company as we continue to transform Chemours into a higher-value chemistry company.
Additional information on our segments can be found in Management’s Discussion and Analysis of Financial Condition and Results of
Operations and Note 24 to the Consolidated Financial Statements.
Titanium Technologies Segment
Segment Overview
The Chemours Titanium Technologies segment is the leading global manufacturer of titanium dioxide, or TiO2. TiO2 is a pigment used
to deliver whiteness, opacity, brightness and protection from sunlight in applications such as architectural and industrial coatings, flexible
and rigid plastic packaging, PVC window profiles, laminate papers, coated paper and coated paperboard used for packaging. We sell
our TiO2 products under the Ti-Pure™ brand name to over 800 customers globally. We operate four TiO2 production facilities: two in the
United States (U.S.), one in Mexico and one in Taiwan. In addition, we have a large-scale repackaging and distribution facility in Belgium
and operate a mineral sands mining operation in Starke, Florida. In total, we have a TiO2 capacity of 1.25 million metric tons per year. In
2016, we expanded our TiO2 production facility in Altamira, Mexico. We plan to steadily ramp up production at Altamira, with full capacity
of the new line reaching approximately 200,000 metric tons annually being achieved over the next few years.
Chemours is one of a limited number of producers operating a chloride process for the production of TiO2. We believe that our
proprietary chloride technology enables us to operate plants at a much higher capacity than other chloride technology-based TiO2
producers, uniquely utilizing a broad spectrum of titanium-bearing ore feedstocks and achieving the highest unit margins in our industry.
This technology, which is in use at all of our production facilities, provides us with one of the industry’s lowest manufacturing cost
positions. Our research and development efforts focus on improving production processes and developing TiO2 grades that help our
customers achieve optimal cost and product performance.
TiO2 demand is highly correlated to growth in the global residential housing, commercial construction and packaging markets. Industry
demand for TiO2 is generally expected to be in line with global GDP growth, and can be cyclical due to economic and industry-specific
market dynamics. We believe that the TiO2 demand grew above GDP growth rates in 2016 due to a pent-up demand created by
destocking in 2015. We believe the market growth seen in 2016 was a combination of market growth and the return to more typical
customer inventory levels. We expect TiO2 demand growth to return to approximate GDP growth rates in the long-term. Chemours’
future demand growth may be below average global GDP growth rates if our sales into developed markets outpaces our sales into
emerging markets.
Our Titanium Technologies segment net sales by region for the years ended December 31, 2016, 2015, and 2014 is shown in the chart
below:
Titanium Technologies Sales by Region
35%
30%
25%
20%
15%
10%
5%
0%
North America
Asia Pacific
2016
2015
EMEA
2014
Latin America
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The Chemours Company
We sell over 20 different grades of TiO2, with each pigment grade tailored for targeted applications. Our portfolio of premium
performance TiO2 pigment grades provide end users with benefits beyond opacity, such as longer lasting performance, brighter colors
and the brilliant whites achievable only through Chloride manufactured pigment.
We have operated a titanium mine in Starke, Florida since 1949. The mine provides us with access to a low cost source of domestic,
high quality ilmenite ore feedstock and supplies less than ten percent of our ore feedstock consumption needs. Co-products of our
mining operations, which comprised less than five percent of our total sales in Titanium Technologies in 2016, are zircon (zirconium
silicate) and staurolite minerals. We are a major supplier of high quality calcined zircon in North America, primarily focused on the
precision investment casting (PIC) industry, foundry and specialty applications, and ceramics. Our staurolite blasting abrasives, sold as
Starblast, are used in steel preparation and maintenance, and paint removal.
Revenue and earnings performance in Titanium Technologies reflect the cyclical nature of the global TiO2 business. TiO2 pricing tends
to move up and down in a cyclical manner depending in large part on global economic conditions. Following the global financial crisis in
2008, global economic recovery, resulting from the impact of government stimulus, resulted in strong customer demand for TiO2
compared to available supply. This drove TiO2 prices higher, ultimately reaching a historical peak in 2012. New industry capacity,
stimulated by that period of strong demand between 2008-2012, came online at the same time that global GDP fell back to a 2-3
percent annual growth rate. This oversupply situation resulted in price declines, until early 2016. We believe the TiO2 industry has
moved past the bottom of the cycle and has returned to a modest level of profitability. As described, Titanium Technologies has unique
capabilities which deliver the industry’s best cost position, resulting in strong operating cash flow.
Industry Overview and Competitors
We estimate the worldwide demand for TiO2 in 2016 was approximately 5.7 million metric tons, of which 3.6 million metric tons were for
premium performance pigments. Worldwide capacity in 2016 was estimated to be approximately 7.0 million metric tons. The products
manufactured on this global capacity base are not fully substitutable due to pigment quality consistency and pigment product design.
We believe that
for general
purpose-lower performance production.
the premium performance manufacturing base is considerably higher than that
the utilization of
Competition in the TiO2 pigment market is based primarily on product performance (both product design and quality consistency),
supply capability and technical service. Our major competitors within higher performance pigments include: The National Titanium
Dioxide Company, Ltd. (Cristal), Huntsman International LLC, Kronos Worldwide, Inc. and Tronox Limited.
Beyond multi-national suppliers, the other TiO2 pigment producers are very fragmented and mostly utilize the sulfate production process
and compete in the general purpose-lower performance pigment market. In 2016, the combination of Sichuan Lomon and Henan
Billions into the Lomon Billions entity demonstrated the consolidation of Chinese producers and created a large global producer
representing approximately eight percent of global capacity. In the next one to three years, industry experts believe that there will be no
new capacity added outside of China. Within China, the announced added effective capacity is expected to be somewhat offset by
capacity shutdowns at marginal producers. Certain new capacity additions announced in China are based on a chloride technology.
Raw Materials
The primary raw materials used in the manufacture of TiO2 are titanium-bearing ores, chlorine, calcined petroleum coke and energy. We
source titanium-bearing ores from a number of suppliers around the globe, who are primarily located in Australia and Africa. Our
titanium mine in Starke, Florida supplies less than ten percent of our raw material needs. To ensure proper supply volume and to
minimize pricing volatility, we generally enter into contracts in which volume is requirement-based and pricing is determined by a range
of mechanisms structured to help us achieve competitive pricing relative to the market. We typically enter into a combination of long-
and mid-term supply contracts and source our raw material from multiple suppliers across different regions and from multiple sites per
supplier. Furthermore, we typically purchase multiple grades of ore from each supplier to limit our exposure to any single supplier for
any single grade of ore in any given time period. Historically, we have not experienced any problems renewing such contracts for raw
materials or securing our supply of titanium-bearing ores.
We play an active role in ore source development around the globe, especially for those ores which can only be used by Chemours,
given the capability of our unique process technology. Supply chain flexibility allows for ore purchase and use optimization to manage
short-term demand fluctuations and provides long-term competitive advantage. Our process technology and ability to use lower grade
ilmenite ore gives us the flexibility to alter our ore mix to the lowest cost configuration based on sales, demand and projected ore pricing.
Lastly, we have taken steps to optimize routes for distribution and increase storage capacity at our production facilities.
6
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Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Condensed Consolidating Statements of Comprehensive Income (Loss)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $
3,749
$
$
(1,571)
$
Year Ended December 31, 2016
Guarantor
Guarantor
and
Non-
Eliminations
Subsidiaries
Subsidiaries
Adjustments
Consolidated
Parent
Issuer
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . .
Research and development expense . . . . . . . . . . . . . . . . .
Restructuring and asset related charges, net . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliates . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of subsidiaries . . . . . . . . . . . . . . . . . . .
Interest (expense) income, net
. . . . . . . . . . . . . . . . . . . . .
Intercompany interest income (expense), net . . . . . . . . . . . .
Other income, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Loss) income before income taxes . . . . . . . . . . . . . . . .
(Benefit from) provision for income taxes . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net income attributable to noncontrolling interests . . . .
—
—
21
—
—
21
—
100
(211)
60
20
(52)
(59)
7
—
7
3,218
531
794
77
168
1,039
4
—
(3)
4
193
(310)
(52)
(258)
—
3,222
2,615
607
139
3
2
144
25
—
1
(64)
54
479
100
379
—
379
321
(1,543)
(28)
(20)
—
—
(20)
—
(100)
—
—
(20)
(128)
(7)
(121)
—
(121)
(66)
5,400
4,290
1,110
934
80
170
1,184
29
—
(213)
—
247
(11)
(18)
7
—
7
(34)
Net income (loss) attributable to Chemours . . . . . . . . . . .
$
(258) $
Comprehensive (loss) income attributable to Chemours . . . . .
(34) $
(255) $
$
$
$
$
$
$
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
For the three months ended
2015
March 31
June 30
September 30
December 31
Full Year
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,363 $
1,508 $
1,486 $
1,360 $
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,111
1,282
Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . .
Net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Chemours . . . . . . . . . . . . . . .
Basic earnings (loss) per share(1)
. . . . . . . . . . . . . . . . . . . . .
Diluted earnings (loss) per share(1)
. . . . . . . . . . . . . . . . . . . .
58
43
43
0.24
0.24
(18)
(18)
(18)
(0.10)
(0.10)
1,222
(107)
(29)
(29)
(0.16)
(0.16)
1,147
(121)
(86)
(86)
(0.48)
(0.48)
5,717
4,762
(188)
(90)
(90)
(0.50)
(0.50)
(1) On July 1, 2015, E. I. du Pont de Nemours and Company distributed 180,966,833 shares of Chemours’ common stock to holders
of its common stock. Basic and diluted earnings (loss) per common share for all periods prior to July 1, 2015 were calculated using
the shares distributed on July 1, 2015. Refer to Note 10 for information regarding the calculation of basic and diluted earnings per
*
The summation of the quarterly data may not foot due to rounding.
Note 27. Guarantor Condensed Consolidating Financial Information
The following guarantor financial information is included in accordance with Rule 3-10 of Regulation S-X (Rule 3-10) in connection with
the issuance of the Notes by The Chemours Company (the “Parent Issuer”). The Notes are fully and unconditionally guaranteed, jointly
and severally, on a senior unsecured unsubordinated basis, in each case, subject to certain exceptions, by the Parent Issuer and by
certain subsidiaries (together, the “Guarantor Subsidiaries”). Each of the Guarantor Subsidiaries is 100% owned by the Company. None
of the other subsidiaries of the Company, either direct or indirect, guarantee the Notes (together, the “Non-Guarantor Subsidiaries”). The
Guarantor Subsidiaries, excluding the Parent Issuer, will be automatically released from those guarantees upon the occurrence of
certain customary release provisions.
The following condensed consolidating financial information is presented to comply with the Company’s requirements under Rule 3-10:
the Consolidating Statements of Comprehensive Income (Loss) for the years ended December 31, 2016, 2015 and 2014;
the Consolidating Balance Sheets as of December 31, 2016 and 2015;
share.
•
•
•
As discussed in Note 2, Chemours did not operate as a separate, stand-alone entity for the full period covered by consolidated financial
statements. Prior to our spin-off on July 1, 2015, Chemours operations were included in DuPont’s financial results in different legal
forms, including but not limited to wholly-owned subsidiaries for which Chemours was the sole business, components of legal entities in
which Chemours operated in conjunction with other DuPont businesses and a majority owned joint venture. For periods prior to July 1,
2015, the condensed consolidated financial
information has been prepared from DuPont’s historical accounting records and are
presented on a stand-alone basis as if the business operations had been conducted independently from DuPont.
The condensed consolidating financial information is presented using the equity method of accounting for the Company’s investments
in 100% owned subsidiaries. Under the equity method, the investments in subsidiaries are recorded at cost and adjusted for our share
of the subsidiaries cumulative results of operations, capital contributions, distributions and other equity changes. The elimination entries
principally eliminate investments in subsidiaries and intercompany balances and transactions. The financial information in this footnote
should be read in conjunction with the consolidated financial statements presented and other notes related thereto contained in this
Annual Report.
As discussed in Note 7, the Company entered into a stock and asset purchase agreement with Lanxess, pursuant to which Lanxess
acquired the Company’s C&D business comprise of certain assets and subsidiaries of the Company, including International Dioxide,
Inc., which was a guarantor subsidiary.
The Chemours Company
Transporting chlorine, one of our primary raw materials, can be costly. To reduce our expense and our need to transport chlorine, we
have a chlor-alkali production facility run by a third party that is co-located at our New Johnsonville, Tennessee site. Calcined petroleum
coke is an important raw material input to our process. We source calcined petroleum coke from well-established suppliers in North
America and China, typically under contracts that run multiple years to facilitate material and logistics planning through the supply
chain. Distribution efficiency is enhanced through use of bulk ocean, barge and rail transportation modes.
Energy is another key input cost into the TiO2 manufacturing process, representing approximately ten percent of the production cost.
Chemours has access to natural gas based energy at our U.S. and Mexico TiO2 production facilities and our Florida minerals plant,
supporting advantaged energy costs given the low cost shale gas in the U.S. Natural gas-based cogeneration of steam and electricity
was recently extended as part of the major expansion at one of our TiO2 production facilities.
Sales, Marketing and Distribution
We sell the majority of our products through a direct sales force. We also utilize third-party sales agents and distributors to expand our
reach. TiO2 represents a significant raw material cost for our customers and as a result, purchasing decisions are often made by our
customers’ senior management team. Our sales organization works to develop and maintain close relationships with key decision
makers in our value chain.
In addition, our sales and technical service teams work together to develop relationships with all layers of our customers’ organizations
to ensure that we meet our customers’ commercial and technical requirements. When appropriate, we collaborate closely with
customers to solve formulation or application problems by modifying product characteristics or developing new product grades.
To ensure an efficient distribution, we have a large fleet of railcars, which are predominantly used for outbound distribution of products
in the U.S. and Canada. A dedicated logistics team, along with external partners, continually optimizes the assignment of our
transportation equipment to product lines and geographic regions in order to maximize utilization and maintain an efficient supply chain.
Customers
Globally, we serve over 800 customers through our Titanium Technologies segment. In 2016, our ten largest Titanium Technologies
customers accounted for approximately 30 percent of the segment’s sales. No single Titanium Technologies customer represented
more than ten percent of our segment sales in 2016. Our larger customers in the U.S. and Europe are typically served through direct
sales and tend to have medium- to long-term contracts with annual supply volume requirements and periodic price adjustment
mechanisms. We serve our small- and mid-size customers through a combination of our direct sales and distribution network.
Our direct customers in Titanium Technologies are producers of decorative coatings, automotive and industrial coatings, polyolefin
masterbatches, polyvinylchloride window profiles, engineering polymers, laminate paper, coatings paper and coated paperboard. We
these sectors. We also deliver a high level of
focus on developing long-term partnerships with key market participants in each of
technical service to satisfy our customers’ specific needs, which helps us maintain strong customer relationships.
the Consolidating Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014.
Seasonality
The demand for TiO2 is subject to seasonality due to the influence of weather conditions and holiday seasons on some of our
applications, such as decorative coatings. As a result, our TiO2 sales volume is typically lowest in the first quarter, highest in the second
and third quarters and moderate in the fourth quarter. This pattern applies to the entire TiO2 market, but may vary by region, country or
application. It can also be altered by economic or other demand cycles.
Fluoroproducts Segment
Segment Overview
Our Fluoroproducts segment is a global leader in providing fluorine-based, advanced material solutions. The segment creates products
that have unique properties such as high temperature resistance, high chemical resistance and unique di-electric properties for
applications across a broad array of industries and applications. We are a global leader in providing fluoroproducts, such as refrigerants
and industrial fluoropolymer resins and derivatives.
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The Chemours Company
The manufacturing of
fluoroproducts involves complex processes which include the use of highly corrosive and hazardous
intermediates. We have an industry-leading safety culture and apply world-class technical expertise to ensure that our operations run
safely and reliably. These capabilities, alongside our research and development expertise, allow us to continuously improve our process
technology.
We sell fluoroproducts through two primary product groups: Fluorochemicals and Fluoropolymers.
and
potential
Fluorochemicals products include refrigerants, air conditioning, foam expansion agents, propellants and fire extinguishants. We have
introduction of Freon™ in 1930. Since the original
held a leading position in the fluorochemicals market since the commercial
chlorofluorocarbons (CFCs) based product was introduced, we have been at the forefront of new-technology research for lower global
warming
and
hydrochlorofluorocarbons (HCFCs). We have a leading position in HFC refrigerants under the brand name Freon™ and are a leader in
the development of sustainable technologies like Opteon™, a line of low Global Warming Potential (GWP) hydrofluoroolefin (HFO)
refrigerants, which also have a zero ozone depletion footprint. Opteon™ was jointly developed with Honeywell International, Inc., in
response to the European Union’s (EU) Mobile Air Conditioning (MAC) Directive. This patented technology offers similar functionality to
current HFC products but meets or exceeds currently mandated environmental standards and in some cases, provides energy
efficiency benefits.
hydrofluorocarbons
development
products,
depleting
leading
(HFCs)
ozone
the
of
to
We led the industry in the Montreal-Protocol (1987) driven transition from CFCs to the lesser ozone depleting HCFCs and non-ozone
depleting HFCs. In 1988, we committed to cease production of CFCs and started manufacturing non-ozone depleting HFCs in the early
1990s. Driven by new and emerging environmental legislations and standards currently being implemented across the U.S., Europe,
Latin America and Japan, we have commercialized Opteon™. Over the years, regulation has pushed the industry to evolve and respond
to environmental concerns. We will continue to invest in research and development to ensure that we remain a leader and are able to
meet our customers’ needs as regulations change.
Fluorochemicals’ refrigerant sales fluctuate by season as sales in the first half of the year generally are slightly higher than sales in the
second half of the year. However, Opteon™ sales into mobile air markets will be driven by automotive production, which may lead to
less seasonality within Fluorochemicals overall.
Fluoropolymers products include various industrial resins, coatings, and other downstream products. We serve a wide range of
industrial and end-user applications spanning from wearable electronics to automotive, network cables, pipe lining and gaskets, among
others. Our products’ unique properties include corrosion resistance, non-stick adhesion, thermal stability, and extreme temperature
resistance.
Our Fluoropolymers products are sold under the brand names Teflon™, Viton™, Krytox™, and Nafion™. Teflon™ coatings and
additives are used in multiple end products including paints, fabrics, carpets, clothing, and other household applications. Teflon™
coatings, resins, additives and films are also used in a wide range of industrial products. Our fluoroelastomer products, sold under the
Viton™ brand name, are used in automotive, consumer electronics, chemical processing, oil and gas, petroleum refining and
transportation, and aircraft and aerospace applications. Our Krytox™ branded lubricants are used in a broad range of
industrial
applications, including bearings, electric motors, and gearboxes. We sell membranes under the brand name Nafion™, which are used in
fuel cells, energy flow battery storage, transportation, stationary power, and medical tubing.
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
(3)
Includes litigation settlements, water treatment accruals and $335 litigation accrual related to the PFOA MDL Settlement (see Note
20), and lease termination charges.
Net sales to external customers by product group were as follows:
Titanium dioxide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2,364
$
2,392
$
Fluoropolymers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fluorochemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance chemicals and intermediates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mining solutions(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sulfur . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,171
1,093
383
262
127
1,246
984
551
301
243
2,937
1,326
1,001
621
314
233
Total net sales to external customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
5,400
$
5,717
$
6,432
Year Ended December 31,
2016
2015
2014
(1) Previously known as Cyanides product group, which was renamed to Mining Solutions effective for the year ended December 31,
2016.
Note 25. Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss), net of income taxes, consisted of:
Currency
Translation
Adjustment
Net
Investment
Hedge
Employee
Benefits
Total
Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
— $
— $
Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumption and establishment of pension plans, net
. . . . . . . . . . . . . .
Other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . .
19
—
19
—
(304)
(285)
(73)
Balance at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(358) $
$
(241) $
Note 26. Quarterly Financial Data (Unaudited)
The following is a summary of the quarterly results of operations for the years ended December 31, 2016 and 2015.
2016
March 31
June 30
September 30
December 31
Full Year
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,297 $
1,383 $
1,398 $
1,322 $
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,095
1,116
1,056
For the three months ended
—
—
—
8
8
14
22
234
204
204
1.12
1.11
—
—
52
18
(311)
(259)
1,024
(273)
(230)
(230)
(1.26)
(1.26)
19
—
19
(311)
(244)
(536)
(41)
(577)
5,400
4,290
(11)
7
7
0.04
0.04
Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . .
Net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Chemours . . . . . . . . . . . . . . .
Basic earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings (loss) per share . . . . . . . . . . . . . . . . . . . . .
70
51
51
0.28
0.28
(41)
(18)
(18)
(0.10)
(0.10)
Net sales to external customers . . . . . . . . . . . . . . . . . . . .
$
2,392
$
2,230
$ 1,095
$
— $5,717
All periods presented reflect the current definition of Adjusted EBITDA.
Titanium
Technologies
Fluoroproducts
Chemical
Solutions
Corporate and
Other
Total
Net sales to external customers . . . . . . . . . . . . . . . . . . . .
$
2,364
$
2,264
$
772
$
— $5,400
Year Ended December 31,
2016
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliates . . . . . . . . . . . . . . . . . . . . .
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in affiliates . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of plant, property and equipment
. . . . . . . . . . .
2015
2014
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliates . . . . . . . . . . . . . . . . . . . . .
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in affiliates . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of plant, property and equipment
. . . . . . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliates . . . . . . . . . . . . . . . . . . . . .
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in affiliates . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of plant, property and equipment
. . . . . . . . . . .
466
119
—
1,513
—
105
326
125
—
1,659
—
255
723
125
—
1,748
—
365
445
101
26
1,400
116
120
300
88
21
1,567
127
142
282
83
20
1,480
124
133
39
30
—
292
—
104
29
52
—
839
—
117
17
48
—
782
—
106
(128)
(3,101)
(82)
(3,935)
34
3
20
9
2
1
9
5
1
—
—
—
(146)
(337)
3,673
Year Ended December 31,
2016
2015
2014
822
284
29
104
136
338
573
267
22
130
136
519
876
257
20
124
604
550
—
257
22
66
21
—
—
—
(40)
Net sales to external customers . . . . . . . . . . . . . . . . . . . .
$
2,937
$
2,327
$ 1,168
$
— $6,432
Total Adjusted EBITDA reconciles to total consolidated net (loss) income in the Consolidated Statements of Operations as follows:
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-operating pension and other postretirement employee benefit (income) costs . . . . .
Exchange losses (gains) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset related charges(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gains) losses on sale of assets and businesses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal and other charges(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
213
284
(20)
57
51
124
(254)
19
359
822
132
267
(3)
(19)
285
73
9
9
8
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
573
$
876
(1) The year ended December 31, 2016 includes $48 pre-tax asset impairment of our Pascagoula Aniline facility (see Note 13), $58
pre-tax asset impairment in connection with the sale of
the Sulfur business (see Note 7), $13 pre-tax asset impairment in
connection with the sale of the Company’s corporate headquarters building (see Note 15) and other asset write-offs. The year
ended December 31, 2015 includes $25 of goodwill impairment (see Note 14) and $45 asset impairment of RMS facility (see Note
13). All charges, except for the corporate headquarters building impairment (which is included in Corporate and Other), are
recorded in the Chemical Solutions segment.
(2)
Includes accounting, legal and bankers transaction fees incurred related to the Company’s strategic initiatives, which includes
pre-sale transaction costs incurred in connection with the sales of the C&D and Sulfur businesses (see Note 7).
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
The Fluoroproducts segment’s net sales by region and product group for the years ended December 31, 2016, 2015, and 2014 are
shown in the charts below:
The Chemours Company
Fluoroproducts Sales by Region
North America
Asia Pacific
EMEA
Latin America
2016
2015
2014
Fluoroproducts Sales by Product Group
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
60%
50%
40%
30%
20%
10%
0%
(Loss) income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(11)
$
(188)
$
Industry Overview and Competitors
Fluorochemicals
Fluoropolymers
2016
2015
2014
Our Fluoroproducts segment competes against a broad variety of global manufacturers, including Honeywell, Arkema, Mexichem,
Daikin, Solvay and Dyneon, as well as regional Chinese and Indian manufacturers. We have a leadership position in fluorine chemistry
and materials science, a broad scope and scale of operations, market driven application development and deep customer knowledge.
Chemours has global leadership positions in the following fluoroproduct categories as set forth in the table below:
Fluoroproducts Leadership Positions
Product Group
Fluorochemicals
Position
#1 Globally
Fluoropolymers
#1 Globally
Key Applications
Key Competitors
Refrigeration and Air
Conditioning
Honeywell, Arkema, Mexichem,
Dongyue, Juhua
Diversified industrial
applications
Daikin, 3M, Solvay, Asahi Glass
Company, Dongyue, Chenguang
Fluoroproducts demand growth is generally in line with global GDP. Within Fluorochemicals, growth may be expected to be higher than
GDP in situations where, for environmental reasons, regulatory drivers constrain the market or drive the market toward lower global
warming alternatives. In Fluoropolymers, market growth is expected to be in line with GDP but influenced by increased competition and
pricing pressure in some businesses.
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The Chemours Company
Developed markets represent the largest fluoroproducts markets today. Global middle class growth and the increasing demand for
expanding infrastructure, consumer electronics, telecommunications, automobiles, refrigerators and air conditioners are all key drivers of
increased demand for various fluoroproducts.
Raw Materials
The primary raw materials required to support the Fluoroproducts segment are fluorspar, chlorinated organics, chlorinated inorganics,
hydrofluoric acid and vinylidene fluoride. These are available in many countries and not concentrated in any particular region.
Our supply chains are designed for maximum competitiveness through favorable sourcing of key raw materials. Our contracts typically
include terms that span from two to ten years, except for select resale purchases that are negotiated on a monthly basis. Most qualified
Fluorspar sources have fixed contract prices or freely negotiated market-based pricing. Although the fluoroproduct industry has
historically relied primarily on fluorspar exports from China, Chemours has diversified its sourcing through multiple geographic regions
and suppliers to ensure a stable and cost competitive supply. Our current supply agreements are generally in effect for the next five
years.
Sales, Marketing and Distribution
With more than 85 years of innovation and development in fluorine science, our technical, marketing and sales teams around the world
have deep expertise in our products and their end-uses. We work with customers to select the appropriate fluoroproducts to meet their
technical performance needs. We sell our products through direct channels and through resellers. Selling agreements vary by product
line and markets served and include both spot pricing arrangements and contracts with a typical duration of one year.
We maintain a large fleet of railcars, tank trucks and containers to deliver our products and support our supply chain needs. For the
portion of the fleet that is leased, related lease terms are usually staggered, which provides us with a competitive cost position as well
as the ability to adjust the size of our fleet in response to changes in market conditions. A dedicated logistics team, along with external
partners, continually optimizes the assignment of our transportation equipment to product lines and geographic regions in order to
maximize utilization and flexibility of the supply chain.
Customers
We serve approximately 2,700 customers and distributors globally, and in many instances, these commercial relationships have been in
place for decades. No single Fluoroproducts customer represented more than ten percent of the segment’s sales in 2016.
Seasonality
Seasonality in Fluorochemicals sales is mainly driven by increased demand for residential, commercial and automotive air conditioning
in the spring. This demand peaks in the summer months and declines in the fall and winter. Commercial refrigeration demand is fairly
steady throughout
the year, but demand is slightly higher during the summer months. There is no significant seasonality for
Fluoropolymers, as demand is relatively consistent throughout the year.
Chemical Solutions Segment
Segment Overview
Our Chemical Solutions segment comprises a portfolio of
industrial chemical businesses primarily operating in the Americas. The
Chemical Solutions segment’s products are used as important raw materials and catalysts for a diverse group of industries including,
among others, gold production, oil and gas, water treatment, electronics and automotive. We are a leading provider of sodium cyanide
in the Americas through our Mining Solutions business. Chemical Solutions generates value through the use of market leading
manufacturing technology, safety performance, product stewardship, and differentiated logistics capabilities.
As part of our transformation plan announced in 2015, we conducted a strategic review of our Chemical Solutions segment. The
process resulted in the divestiture of
three assets and businesses, the shutdown of one business and the decision to retain the
remaining businesses. Specifically, we sold our Aniline facility in Beaumont, Texas to The Dow Chemical Company in March 2016. We
also sold our Sulfur Products business to Veolia in July 2016 and our Clean & Disinfect business to LANXESS Corporation (“Lanxess”)
in August 2016. These divestitures resulted in gross proceeds of approximately $685 million in 2016. In addition, we ceased production
at our RMS facility in Niagara Falls, New York in September 2016. The segment continues to include our mining solutions business
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Note 24. Geographic and Segment Information
Geographic Information
For and As of the Year Ended December 31,
2016
2015
2014
Net
Sales(1)
Net Property,
Plant and
Equipment
Net
Sales(1)
Net Property,
Plant and
Equipment
Net
Sales(1)
Net Property,
Plant and
Equipment
North America(2)
. . . . . . . . . . . . . . . . . . .
$
2,288
$
1,861
$
2,570
$
2,184
$
2,759
$
2,273
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . .
EMEA(3) . . . . . . . . . . . . . . . . . . . . . . . . .
Latin America(4) . . . . . . . . . . . . . . . . . . . .
1,315
1,081
716
129
278
516
1,393
977
777
136
308
549
1,548
1,190
935
140
372
523
Total . . . . . . . . . . . . . . . . . . . . . . . . . .
$
5,400
$
2,784
$
5,717
$
3,177
$
6,432
$
3,308
(1) Net sales are attributed to countries based on customer location.
(2)
Includes net sales in Canada of $125, $140 and $147 in 2016, 2015 and 2014, respectively. Includes net property, plant and
equipment in Canada of $11, $13 and $14 in 2016, 2015 and 2014, respectively.
(3) EMEA includes Europe, Middle East and Africa.
(4) Latin America includes Mexico.
Segment Information
Chemours’ operations are classified into three segments namely: Titanium Technologies, Fluoroproducts and Chemical Solutions.
Corporate costs and certain legal and environmental expenses that are not aligned with the segments and foreign exchange gains and
losses are reflected in Corporate and Other.
The Titanium Technologies segment is the leading global producer of TiO2, a premium white pigment used to deliver opacity. The
Fluoroproducts segment is a leading global provider of fluoroproducts, such as refrigerants and industrial fluoropolymer resins. The
Chemical Solutions segment is a leading North American provider of industrial and specialty chemicals, which includes cyanides, sulfur
products and performance chemicals and intermediates, used in gold production, oil refining, agriculture, industrial polymers and other
industries. Chemours operates globally in substantially all of its product lines.
Certain products are transferred between segments on a basis intended to reflect, as nearly as practicable, the market value of the
products. These product
transfers were limited and were not significant
for each of
the periods presented. Depreciation and
amortization includes depreciation on research and development facilities and amortization of other intangible assets, excluding
write-down of assets. Segment net assets includes net working capital, net property, plant and equipment, and other noncurrent
operating assets and liabilities of the segment. This is the measure of segment assets reviewed by the Chief Operating Decision Maker
Adjusted EBITDA is the primary measure of segment profitability used by the CODM and is defined as income (loss) before income
(“CODM”).
taxes excluding the following:
interest expense, depreciation and amortization,
non-operating pension and other postretirement employee benefit costs, which represent the components of net periodic
costs (income) excluding service cost component,
exchange losses (gains) included in “other income, net” of the statement of operations,
restructuring, asset-related charges and other charges, net,
asset impairments,
losses (gains) on sale of business or assets, and
other items not considered indicative of our ongoing operational performance and expected to occur infrequently.
•
•
•
•
•
•
•
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
existing awards, a retirement eligible employee retains any granted awards upon retirement provided the employee has rendered at
least six months of service following the grant date. Additional RSUs were also granted to key senior management employees with a
performance condition. These RSUs vest on the third anniversary of the date of grant subject to the satisfaction of the performance
condition. The fair value of all stock-settled RSUs is based upon the market price of the underlying common stock as of the grant date.
Non-vested awards of RSUs, both with and without performance feature, as of December 31, 2016 are shown below. The weighted
average grant date fair value of RSUs granted and converted during 2016 was $6.20.
Number of
Shares
(in thousands)
Weighted Average
Grant Date Fair
Value
(per share)
Nonvested, December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,349
$
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,003
(829)
(207)
Nonvested, December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,316
$
14.87
6.20
14.74
15.09
11.23
As of December 31, 2016, there was $12,128 of unrecognized stock-based compensation expense related to RSUs that is expected to
be recognized over a weighted average period of 1.54 years.
Performance Share Units
During 2016, Chemours issued PSUs to key senior management employees which, vest and convert one-for-one to Chemours’
common stock to the extent specified performance goals, including certain market-based conditions, are met over the three year
performance period specified in the grant, subject to exceptions. Each grantee is granted a target award of PSUs, and may earn
between 0% and 200% of the target amount depending on the Company’s performance against the performance goals. During the year
ended December 31, 2016, the Company recorded stock-based compensation related to PSUs as a component of selling, general and
administrative expense of approximately $2. There were no PSUs granted prior to 2016.
The following table provides compensation costs for stock-based compensation related to PSUs:
Number of
Shares
(in thousands)
Weighted Average
Grant Date Fair
Value
(per share)
Nonvested, December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
825
—
(22)
Nonvested, December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
803
$
—
6.10
—
6.10
6.10
A portion of the fair value of PSUs was estimated at the grant date based on the probability of satisfying the market-based conditions
associated with the PSUs using the Monte Carlo valuation method, which assesses probabilities of various outcomes of market
conditions. The other portion of the fair value of the PSUs is based on the fair market value of the Company’s stock at the grant date,
regardless of whether the market-based condition is satisfied. The per unit weighted average fair value at the date of grant for PSUs
granted during the period ended December 31, 2016 was $6.10. The fair value of each PSU grant is amortized monthly into
compensation expense on a straight-line basis over their respective vesting periods over 36 months. The accrual of compensation costs
is based on our estimate of
the final expected value of
the award, and is adjusted as required for the portion based on the
performance-based condition. The Company assumes that forfeitures will be minimal, and recognizes forfeitures as they occur, which
results in a reduction in compensation expense. As the payout of PSUs includes dividend equivalents, no separate dividend yield
assumption is required in calculating the fair value of the PSUs.
The Chemours Company
as well as the product lines at our Belle, West Virginia site, which include our Methylamines, Glycolic Acid and Vazo™ free radical
initiators product lines.
Chemical Solutions operates at three dedicated production facilities in North America, which sells products and solutions through two
primary product groups: Mining Solutions and Performance Chemicals & Intermediates. The Mining Solutions product group includes
our sodium cyanide, hydrogen cyanide, and potassium cyanide product lines. We are the market leader in solid sodium cyanide
production in the Americas, which is used primarily by the mining industry for gold and silver production. In the Performance Chemicals
& Intermediates product group, we manufacture a wide variety of chemicals used in many different applications. Following the recent
divestitures, Performance Chemicals & Intermediates is now comprised of our Methylamines, Glycolic Acid, and Vazo™ product lines.
Our Performance Chemicals & Intermediates business is expected to generally grow in line with growth in global GDP.
Chemical Solutions segment’s net sales by region and primary product groups for the years ended December 31, 2016, 2015, and 2014
are shown in the charts below.
Chemical Solutions Sales by Region
North America
Asia Pacific
EMEA
Latin America
2016
2015
2014
Chemical Solutions Sales by Product Group
80%
70%
60%
50%
40%
30%
20%
10%
0%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Mining Solutions
Performance Chemicals
& Intermediates
1
Divested Business
2
2016
2015
2014
(1) 2015 and 2014 sales were recast to exclude sales from divested business.
(2)
Includes sales from our C&D business, Sulfur business and Aniline facility in Beaumont, TX, which were sold during 2016.
Industry Overview and Competitors
The industrial and specialty chemicals produced by our Chemical Solutions segment are important raw materials for a wide range of
industries and end markets. We hold a long standing reputation for high quality and the safe handling of hazardous products such as
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The Chemours Company
sodium cyanide, methylamines and Vazo™. Our competitive cost positions in these products are the result of our process technology,
manufacturing scale, efficient supply chain and proximity to large customers. Our Chemical Solutions segment also holds, and
occasionally licenses, what we believe to be a leading process technologies for the production of hydrogen and sodium cyanide, which
are used in industrial polymers and in gold production.
Stock Options
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Chemours has global leadership positions in the following product categories:
Product (Product Group)
Mining Solutions(1)
Chemical Solutions Leadership Positions
Position
#1 in Solid Sodium Cyanide
in the Americas
Key Applications
Gold Production
Key Competitors
Orica, Cyanco
(1) Previously known as Cyanides business product group, which was renamed to Mining Solutions for the year ended December 31,
2016.
Raw Materials
Key raw materials for Chemical Solutions include ammonia, methanol, natural gas, hydrogen and caustic soda. We source raw
materials from global and regional suppliers where possible and maintain multiple supplier relationships to protect against supply
disruptions and potential price increases. To further mitigate the risk of raw material availability and cost fluctuation, Chemical Solutions
has also taken steps to optimize routes for distribution, lock in long-term contracts with key suppliers and increase the number of
customer contracts with raw material price pass-through terms. We do not believe that the loss of any particular supplier would be
material to our business.
Sales, Marketing and Distribution
Our technical, marketing and sales teams around the world have deep expertise with our products and their end markets. We
predominantly sell directly to end-customers, although we also use a network of distributors for specific product lines and geographies.
Sales may take place through either spot transactions or via long-term contracts.
Most of Chemical Solutions’ raw materials and products can be delivered by efficient bulk transportation. As such, we maintain a large
fleet of railcars, tank trucks and containers to support our supply chain needs. For the portion of the fleet that is leased, related lease
terms are usually staggered, which provides us with a competitive cost position as well as the ability to adjust the size of our container
fleet in response to changes in market conditions. A dedicated logistics team, along with external partners, continually optimizes the
assignment of our transportation equipment to product lines and geographic regions in order to maximize utilization and flexibility of the
supply chain.
The strategic placement of our production facilities in locations designed to serve our key customer base in the Americas gives us
robust distribution capabilities.
Customers
Our Chemical Solutions segment focuses on developing long-term partnerships with key market participants. Many of our commercial
and industrial relationships have been in place for decades and are based on our proven value proposition of safely and reliably
supplying our customers with the materials needed for their operations. Our reputation and long-term track record is a key competitive
advantage as several of the products’ end users demand the highest level of excellence in safe manufacturing, distribution, handling
and storage. Chemical Solutions has U.S. Department of Transportation Special Permits and Approvals in place for distribution of
various materials associated with each of our business lines as required. Our Chemical Solutions segment serves over 400 customers
globally. No single Chemical Solutions customer represented more than ten percent of the segment’s sales in 2016.
Seasonality
Chemours granted non-qualified options to employees in July 2015 representing replacement of previously granted performance stock
unit awards at DuPont. The July 2015 grant will cliff vest March 1, 2018 and expire 10 years from date of grant. Other than those
options, Chemours’ expense related to stock options was entirely related to options granted to replace outstanding option awards from
DuPont that were converted to Chemours options on July 1, 2015. During 2016, Chemours granted non-qualified options to certain of
its employees, which will serially vest over a three-year period and expire 10 years from the date of grant.
The fair value related to stock options granted was determined using Black-Scholes option pricing model and the weighted average
assumptions are shown in the table below:
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected term (years)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value per stock option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3.41
$ 3.17
The Company determined the dividend yield by dividing the expected annual dividend on the Company’s stock by the option exercise
price. A historical daily measurement of volatility is determined based on Chemours peer companies’ average volatility adjusted for the
Company’s debt leverage. The risk-free interest rate is determined by reference to the yield on an outstanding U.S. Treasury note with a
term equal to the expected life of the option granted. The expected term is determined using a simplified approach, calculated as the
midpoint between the vesting period and the contractual life of the award. After the separation, the simplified approach was used due to
the Company’s lack of historical experience upon which to estimate the expected lives of the options.
The following table summarizes Chemours stock option activity for the year ended December 31, 2016.
Year Ended December 31,
2016
1.46%
6.00
60.00%
2.14%
2015
1.50%
5.40
42.00%
6.90%
Weighted
Average
Exercise
Price
Number of
Shares
(in thousands)
(per share)
Weighted
Average
Remaining
Contractual
Term
(years)
Aggregate
Intrinsic Value
(in thousands)
Outstanding, December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . .
8,284
$
14.66
4.82
$
—
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding, December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . .
Exercisable, December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . .
1,435
(947)
(447)
(356)
7,969
3,912
$
$
5.73
12.17
15.53
5.82
13.72
14.04
5.08
3.25
$
$
66,668
31,487
The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value (the difference between the Company’s
closing stock price on the last trading day of December 31, 2015 and the exercise price, multiplied by the number of in-the-money
options) that would have been received by the option holders had all option holders exercised their in-the-money options at quarter end.
The amount changes based on the fair market value of the Company’s stock. Total intrinsic value of options exercised for year ended
December 31, 2015 was insignificant.
Our Chemical Solutions segment sales are subject to minimal seasonality.
As of December 31, 2016, there was $3,762 of unrecognized stock-based compensation expense related to stock options that is
Intellectual Property
Intellectual property, including trade secrets, certain patents, trademarks, copyrights, know-how and other proprietary rights, is a
critical part of maintaining our technology leadership and competitive edge. Our business strategy is to file patent and trademark
applications globally for proprietary new product and application development technologies. We hold many patents, particularly in
At the time of separation, in accordance with the employee matters agreement, the Company issued RSUs that serially vest over a
three-year period and, upon vesting, convert one-for-one to Chemours common stock to replace similar DuPont awards. Under the
expected to be recognized over a weighted average period of 1.64 years.
Restricted Share Units
12
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Defined Benefit Plan
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
DuPont contributed, on behalf of Chemours, $35 to its pension plans other than the principal U.S. pension plan in 2014. DuPont
contributed, on behalf of Chemours, $66 to its other long-term employee benefit plans in 2014. DuPont contributed, on behalf of
Chemours, $38 in the first half of 2015 to its pension and other long-term benefit plans and Chemours contributed $8 during 2015 to its
pension plans. Chemours contributed $16 during 2016. Chemours expects to contribute $15 to its pension plans in 2017.
Estimated future benefit payments
The following benefit payments are expected to be paid over the next five years and the five years thereafter as of December 31, 2016:
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52
40
42
43
43
2022 – 2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
232
DuPont’s contributions to the plan on behalf of Chemours were allocated in the amounts of $52 for the year ended December 31, 2014.
In addition, DuPont contributed on behalf of Chemours about $26 to its defined contribution plans for the first half of 2015. From July 1
to December 31, 2015, Chemours contributed $28 to its defined contribution plan. For the year ended December 31, 2016, Chemours
Defined Contribution Plan
contributed $44 to its defined contribution plan.
Note 23. Stock-based Compensation
Total stock-based compensation cost included in the Consolidated Statements of Operations was $20, $17 and $7 for the years ended
December 31, 2016, 2015 and 2014, respectively. The income tax benefits related to stock-based compensation arrangements were $8,
$7 and $3 for the years ended December 31, 2016, 2015 and 2014, respectively.
Stock-based compensation expense in prior years and until separation on July 1, 2015 was allocated to Chemours based on the portion
of DuPont’s incentive stock program in which Chemours employees participated. Adopted at separation, the Chemours Company
Equity and Incentive Plan grants certain employees, independent contractors, or non-employee directors of
the Company different
forms of awards, including stock options, restricted share units (RSUs) and performance share units (PSUs). The equity and incentive
plan has maximum shares reserve of 13,500,000 for the grant of equity awards plus the number of shares of converted awards
(described below). As of December 31, 2016, 7,806,040 shares of equity and incentive plan reserve are still available for grants.
Chemours Compensation Committee determines the long-term incentive mix, including stock options PSU and RSU, and may authorize
new grants annually.
to receive equity compensation awards of Chemours in replacement of previously outstanding awards granted under various DuPont
stock incentive plans prior to the separation. In connection with the spin-off, these awards were converted into new Chemours equity
awards using a formula designed to preserve the intrinsic value of the awards immediately prior to the July 1, 2015 spin-off. At the date
of conversion, total intrinsic value of the converted options was $18. As a result of the conversion of these awards, we recorded an
approximate $3 incremental charge in the third quarter of 2015. The terms and conditions of the DuPont awards were replicated and as
necessary, adjusted to ensure that the vesting schedule and economic value of the awards was unchanged by the conversion. Subject
to vesting condition of the award, a retirement eligible employee retains any granted awards upon retirement provided the employee has
rendered at least six months of service following the grant date.
The Chemours Company
our Fluoroproducts segment, as described herein. These patents, including various patents that will expire from 2017 through 2034, in
the aggregate, are believed to be of material importance to our business. However, we believe that no single patent (or related group of
patents) is material in relation to our business as a whole. In addition, particularly in our Titanium Technologies segment, we hold
significant intellectual property in the form of trade secrets and, while we believe that no single trade secret is material in relation to our
combined business as a whole, we believe they are material
trade secrets do not have a
predetermined validity period, but are valid indefinitely, so long as their secrecy is maintained. We work actively on a global basis to
create, protect and enforce our intellectual property rights. The protection afforded by these patents and trademarks varies based on
country, scope of individual patent and trademark coverage, as well as the availability of legal remedies in each country. Although
certain proprietary intellectual property rights are important to the success of our company, we do not believe that we are materially
dependent on any particular patent or trademark. We believe that securing our intellectual property is critical to maintaining our
technology leadership and our competitive position, especially with respect
to new technologies or the extensions of existing
technologies. Our proprietary process technology is also a source of incremental income through licensing arrangements.
in the aggregate. Unlike patents,
Our Titanium Technologies segment in particular relies upon unpatented proprietary knowledge and continuing technological innovation
and other trade secrets to develop and maintain our competitive position in this space. Our proprietary chloride production process is an
important part of our technology and our business could be harmed if our trade secrets are not maintained in confidence. In our
Titanium Technologies intellectual property portfolio, we consider our trademark Ti-Pure™ to be a valuable asset and have registered
this trademark in a number of countries.
Our Fluoroproducts segment is the technology leader in the markets in which it participates. We have one of
the largest patent
portfolios in the fluorine derivatives industry. In our Fluoroproducts intellectual property portfolio, we consider our Freon™, Opteon™,
Teflon™, Viton™, Nafion™ and Krytox™ trademarks to be valuable assets.
Our Chemical Solutions segment is a manufacturing and application development technology leader in a majority of the markets in
which it participates. Trade secrets are one of the key elements of our intellectual property security in Chemical Solutions as most of
the segment’s manufacturing and application development technologies are no longer under patent coverage.
At separation, certain of our subsidiaries entered into an intellectual property cross-license agreement with DuPont, pursuant to which
(i) DuPont has agreed to license to Chemours certain patents, know-how and technical information owned by DuPont or its affiliates
and necessary or useful
in Chemours’ business, and (ii) Chemours has agreed to license to DuPont certain patents owned by
Chemours or its affiliates and necessary or useful in DuPont’s business. In most circumstances, the licenses are perpetual, irrevocable,
sublicenseable (in connection with the party’s business), assignable (in connection with a sale of the applicable portion of a party’s
business or assets, subject to certain exceptions) worldwide licenses in connection with the current operation of the businesses and,
with respect to specified products and fields of use, future operation of such businesses, subject to certain limitations with respect to
specified products and fields of use.
Research and Development
We perform research and development activities in all of our segments with the majority of our efforts focused in the Fluoroproducts
segment. The Fluoroproducts segment efforts center on developing new sustainable fluorochemicals as well as determining new
applications and formulations for fluoropolymers that meet customers’ technical requirements. In Titanium Technologies and Chemical
Solutions, our efforts are focused on process technology to reduce cost and maintain safety and stewardship standards. The table
below sets forth the last three years of research and development expense by segment:
In accordance with the employee matters agreement between DuPont and Chemours, certain executives and employees were entitled
(Dollars in millions)
Year Ended December 31,
2016
2015
2014
Titanium Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Fluoroproducts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chemical Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
27
46
7
80
$
$
33
50
14
97
$
$
47
79
17
143
Backlog
In general, the Company does not manufacture its products against a backlog of orders and does not consider backlog to be a
significant indicator of the level of future sales activity. Production and inventory levels are based on the level of incoming orders as
well as projections of future demand. Therefore, the Company believes that backlog information is not material to understanding its
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overall business and should not be considered a reliable indicator of the Company’s ability to achieve any particular level of revenue or
financial performance.
The Chemours Company
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Environmental Matters
of December 31, 2016 and 2015.
The table below presents the fair values of Chemours’ pension assets by level within the fair value hierarchy, as described in Note 3, as
2
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Information related to environmental matters is included in several areas of this report: (1) Item 1A — Risk Factors, (2) Item 3 — Legal
Proceedings — Environmental Proceedings, (3) Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of
Operations, and (4) Notes 3 and 20 to the Consolidated Financial Statements.
Available Information
Chemours is subject to the reporting requirements under the Securities Exchange Act of 1934. Consequently, the Company is required
to file reports and information with the Securities and Exchange Commission (SEC), including reports on the following forms: annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934.
The public may read and copy any materials the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE,
the Public Reference Room by calling the SEC at
Washington, DC 20549. The public may obtain information on the operation of
1-800-SEC-0330. The SEC also maintains an Internet site at http://www.sec.gov that contains reports, proxy and information
statements, and other information regarding issuers that file electronically with the SEC.
The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those
reports are also accessible on the Company’s website at http://www.chemours.com by clicking on the section labeled “Investor
Relations”, then on “Filings & Reports” and then on “SEC Filings”. These reports are made available, without charge, as soon as is
reasonably practicable after the Company files or furnishes them electronically with the SEC.
Employees
We have approximately 7,000 employees, approximately 21% of whom are represented by unions or works councils. Management
believes that its relations with its employees and labor organizations are good. There have been no strikes or work stoppages in any of
our locations in recent history.
Asset Category:
Debt – government issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
Item 1A. RISK FACTORS
The company’s operations could be affected by various risks, many of which are beyond our control. Based on current information, we
believe that the following identifies the most significant risk factors that could affect our business, results of operations or financial
condition. Past financial performance may not be a reliable indicator of future performance and historical trends should not be used to
anticipate results or trends in future periods. See “Cautionary Statement Concerning Forward-Looking Statements” for more details.
Risks Related to Our Business
Conditions in the global economy and global capital markets may adversely affect our results of operations, financial
condition, and cash flows.
Our business and operating results may in the future be adversely affected by global economic conditions, including instability in credit
markets, declining consumer and business confidence, fluctuating commodity prices and interest rates, volatile exchange rates, and
other challenges such as the changing financial regulatory environment that could affect the global economy. Our customers may
experience deterioration of their businesses, cash flow shortages, and difficulty obtaining financing. As a result, existing or potential
customers may delay or cancel plans to purchase products and may not be able to fulfill their obligations to us in a timely fashion.
Further, suppliers could experience similar conditions, which could impact their ability to supply materials or otherwise fulfill their
obligations to us. Because we have significant international operations, there are a large number of currency transactions that result
from international sales, purchases, investments and borrowings. Also, our effective tax rate may fluctuate because of variability in
geographic mix of earnings, changes in statutory rates, and taxes associated with repatriation of non-U.S. earnings. Future weakness
in the global economy and failure to manage these risks could adversely affect our results of operations, financial condition and cash
flows in future periods.
14
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Asset Category:
Debt – government issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
Fair Value Measurements at December 31, 2016
Total
Level 1
Level 2
Debt – corporate issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt – asset backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. and non U.S. equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives – asset position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives – liability position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension trust payables, net(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,169
1,174
$
214
$
(1) Payables are primarily for investment securities purchased.
Fair Value Measurements at December 31, 2015
Total
Level 1
Level 2
8
76
25
28
—
—
77
—
7
60
—
37
—
—
40
4
433
142
42
502
3
(32)
77
7
(5)
465
148
33
460
4
(16)
40
6
(3)
425
66
17
474
3
(32)
—
7
960
458
88
33
423
4
(16)
—
2
992
Debt – corporate issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt – asset backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. and non U.S. equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives – asset position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives – liability position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension trust payables, net(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,137
1,140
$
148
$
(1) Payables are primarily for investment securities purchased.
For pension plan assets classified as Level 1, total fair value is either the price of the most recent trade at the time of the market close
or the official close price, as defined by the exchange on which the asset is most actively traded on the last trading day of the period,
multiplied by the number of units held without consideration of transaction costs.
For pension benefit plan assets classified as Level 2, where the security is frequently traded in less active markets, fair value is based
on the closing price at the end of the period; where the security is less frequently traded, fair value is based on the price a dealer would
pay for the security or similar securities, adjusted for any terms specific to that asset or liability. Market inputs are obtained from
well-established and recognized vendors of market data and subjected to tolerance and quality checks. For derivative assets and
liabilities, standard industry models are used to calculate the fair value of
the various financial
instruments based on significant
observable market inputs, such as foreign exchange rates, commodity prices, swap rates, interest rates and implied volatilities obtained
from various market sources.
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Pension plans with accumulated benefit obligation in excess of plan assets at December 31,
2016
2015
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
179
151
84
190
157
90
Assumptions
The Company generally utilizes discount rates that are developed by matching the expected cash flows of each benefit plan to various
yield curves constructed from a portfolio of high quality, fixed income instruments provided by the plan’s actuary as of the measurement
date. The expected rate of return on assets reflects economic assumptions applicable to each country.
The following assumptions have been used to determine the benefit obligations and net benefit cost:
Weighted average assumptions used to determine benefit obligations at December 31,
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
1.8%
2.5%
2015
2.4%
2.6%
(1) The rate of compensation increase represents the single annual effective salary increase that an average plan participant would
receive during the participant’s entire career at Chemours.
Weighted average assumptions used to determine net benefit cost for the years ended
December 31,
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
2.4%
2.5%
5.7%
2015
1.7%
3.9%
7.2%
Plan Assets
Each pension plan’s assets are invested through a master trust fund. The strategic asset allocation for the trust fund is selected by
management, reflecting the results of comprehensive asset and liability modeling. Chemours establishes strategic asset allocation
percentage targets and appropriate benchmarks for significant asset classes with the aim of achieving a prudent balance between
return and risk. Strategic asset allocations in countries are selected in accordance with the laws and practices of those countries.
The weighted average target allocation for Chemours’ pension plan assets is summarized as follows:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. and non-U.S. equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
2015
2.5%
41.6%
55.9%
2.7%
42.3%
55.0%
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100.0%
100.0%
Fixed income securities include corporate issued, government
issued and asset backed securities. Corporate debt
investments
encompass a range of credit risk and industry diversification.
Fair value calculations may not be indicative of net realizable value or reflective of future fair values. Furthermore, although Chemours
believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or
assumptions to determine the fair value of certain financial
instruments could result in a different fair value measurement at the
reporting date.
The Chemours Company
Market conditions, as well as global and regional economic downturns that adversely affect the demand for the end-use
products that contain TiO2, fluoroproducts or our other products, could adversely affect the profitability of our operations and
the prices at which we can sell our products, negatively impacting our financial results.
Our revenue and profitability is largely dependent on the TiO2 industry and the industries that are end users of our fluoroproducts. TiO2
and our fluoroproducts, such as refrigerants and resins, are used in many “quality of life” products for which demand historically has
been linked to global, regional and local GDP and discretionary spending, which can be negatively impacted by regional and world
events or economic conditions. Such events are likely to cause a decrease in demand for our products and, as a result, may have an
adverse effect on our results of operations and financial condition. The future profitability of our operations, and cash flows generated
by those operations, will also be affected by the available supply of our products in the market.
Our reported results could be adversely affected by currency exchange rates and currency devaluation could impair our
competitiveness.
Due to our international operations, we transact in many foreign currencies, including but not limited to the Euro, Brazilian real, Mexican
peso and Japanese yen. As a result, we are subject to the effects of changes in foreign currency exchange rates. During times of a
strengthening U.S. dollar, our reported net revenues and operating income will be reduced because the local currency will be translated
into fewer U.S. dollars. During periods of local economic crisis, local currencies may be devalued significantly against the U.S. dollar,
potentially reducing our margin. For example, unfavorable movement in the Euro has negatively impacted our results of operations since
the second half of 2014, and further decline of
the Euro could affect future periods. Currently, Chemours does not hedge on a
transactional basis. There can be no assurance that any hedging action in the future will lessen the adverse impact of a variation in
currency rates. Also, actions to recover margins may result in lower volume and a weaker competitive position, which may have an
adverse effect on our profitability. For example, in Titanium Technologies, a substantial portion of our manufacturing is located in the
U.S. and Mexico, while our TiO2 is delivered to customers around the world. Furthermore, our ore cost is principally denominated in U.S.
dollars. Accordingly, in periods when the U.S. dollar or Mexican Peso strengthen against other local currencies such as the Euro, our
costs are higher relative to our competitors who operate largely outside of the United States, and the benefits we realize from having
lower costs associated with our manufacturing process are reduced, impacting our profitability.
If we are unable to execute our cost reduction plans successfully, our total operating costs may be greater than expected,
which may adversely affect our profitability.
We have announced a transformation plan that includes a number of cost saving measures. We have implemented a number of these
measures and have realized a portion of the anticipated benefits. While we continue to search for opportunities to reduce our costs and
expenses to improve operating profitability without jeopardizing the quality of our products or the effectiveness of our operations, our
success in achieving targeted cost and expense reductions depends upon a number of factors such as timing of execution, market
condition, and regulatory and local requirements and approvals. If we do not successfully execute on our cost reduction initiatives or if
we experience delays in completing the implementation of these initiatives, our results of operations or financial condition could be
adversely affected.
Our results of operations could be adversely affected by litigation and other commitments and contingencies.
infringement, antitrust claims, and claims for
We face risks arising from various unasserted and asserted legal claims, investigation and litigation matters, such as product liability,
injury stemming from alleged
patent
third party property damage or personal
environmental actions (which may concern regulated or unregulated substances) or other torts,
including, as discussed below,
litigation related to the production and use of PFOA (collectively, perfluorooctanoic acids and its salts, including the ammonium salt)
by DuPont prior to the separation. We have noted a nationwide trend in purported class actions against chemical manufacturers
generally seeking relief such as medical monitoring, property damages, off-site remediation and punitive damages arising from alleged
environmental actions (which may concern regulated or unregulated substances) or other torts without claiming present personal
injuries. We also have noted a trend in public and private nuisance suits being filed on behalf of states, counties, cities and utilities
alleging harm to the general public. Various factors or developments can lead to changes in current estimates of liabilities such as a
final adverse judgment, significant settlement or changes in applicable law. A future adverse ruling or unfavorable development could
result in future charges that could have a material adverse effect on us. An adverse outcome in any one or more of these matters could
be material to our financial results and could adversely impact the value of any of our brands that are associated with any such matters.
As discussed in more detail in Note 20 to the Consolidated Financial Statements, DuPont is the named defendant in approximately
3,500 lawsuits alleging that the respective plaintiffs were exposed to PFOA in drinking water as a result of DuPont’s use of PFOA at
the Washington Works plant
injury lawsuits were consolidated in multi-district
litigation in the United States District Court for the Southern District of Ohio (the “MDL”). As of December 31, 2016, three cases
the plaintiff, and several other cases have been settled. Although we,
have gone to trial and resulted in a jury verdict in favor of
in Parkersburg, West Virginia. These personal
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through DuPont, are pursuing appeals of the cases that resulted in a jury verdict, there can be no assurance that any such appeal
succeeds. On February 11, 2017, DuPont entered into an agreement in principle with plaintiffs’ counsel representing the MDL plaintiffs
providing for a global settlement of all cases and claims in the MDL, including all filed and unfiled personal injury cases and claims that
are part of the plaintiffs’ counsel’s claim inventory, as well as cases that have been tried to a jury verdict (the “MDL Settlement”). The
total settlement amount is $670.7 million dollars in cash, half of which will be paid by Chemours and half paid by DuPont. DuPont’s
payment would not be subject to indemnification or reimbursement by Chemours, and Chemours has accrued $335 million associated
with this matter at December 31, 2016. In exchange for payment of the total settlement amount, DuPont and Chemours will receive a
complete release of all claims by the settling plaintiffs. The MDL Settlement was entered into solely by way of compromise and
settlement and is not in any way an admission of liability or fault by DuPont or Chemours. The MDL Settlement is not subject to court
approval; however, the MDL Settlement may not proceed in certain conditions, including a walk-away right that enables DuPont to
terminate the MDL Settlement if more than a specified number of plaintiffs determine not to participate. If the MDL Settlement does not
proceed, any cases stayed or additional lawsuits may go to trial or appeal. An adverse ruling at trial or on appeal could result in us
incurring additional costs and liabilities. There could also be new lawsuits filed related to DuPont’s use of PFOA, its manufacture of
PFOA, or its customers use of DuPont products that may not be within the scope of the MDL Settlement. Any such new litigation could
also result in us incurring additional costs and liabilities, which may be material to our financial results. If such litigation described above
were to occur and if significant unfavorable outcomes in a number of cases were to result, losses, if incurred, in excess of amounts
accrued at December 31, 2016 could, in the aggregate, have a material adverse effect on us.
In the ordinary course of business, we may make certain commitments, including representations, warranties and indemnities relating
to current and past operations, including those related to divested businesses, and issue guarantees of
third party obligations.
Additionally, we are required to indemnify DuPont with regard to liabilities allocated to, or assumed by us under each of the separation
agreement, the employee matters agreement, the tax matters agreement and the intellectual property cross-license agreement that
were executed prior to the spin-off. These indemnification obligations to date have included defense costs associated with certain
litigation matters as well as certain damages awards, settlements, and penalties. In connection with MDL Settlement mentioned above,
DuPont and Chemours agreed, subject to and following the completion of the MDL Settlement, to a limited sharing of potential future
PFOA liabilities (i.e., “indemnifiable losses,” as defined in the separation agreement between DuPont and Chemours) for a period of five
years. During that five-year period, Chemours would annually pay future PFOA liabilities up to $25 million and, if such amount is
exceeded, DuPont would pay any excess amount up to the next $25 million (which payment will not be subject to indemnification by
Chemours), with Chemours annually bearing any further excess liabilities under the terms of
the separation agreement. After the
five-year period,
indemnification obligations under the separation
agreement would continue unchanged. Chemours has also agreed that, upon the MDL Settlement becoming effective, it will not contest
its liability to DuPont under the separation agreement for PFOA liabilities on the basis of ostensible defenses generally applicable to the
indemnification provisions under the separation agreement, including defenses relating to punitive damages, fines or penalties or
attorneys’ fees, and waives any such defenses with respect to PFOA liabilities. Chemours has, however, retained defenses as to
whether any particular PFOA claim is within the scope of
the separation agreement. As we are
required to make payments, such payments could be significant and could exceed the amounts we have accrued with respect thereto,
adversely affecting our results of operations. In addition, in the event that DuPont seeks indemnification for adverse trial rulings or
outcomes, these indemnification claims could materially adversely affect our financial condition. Disputes between Chemours and
DuPont many also arise with respect to indemnification matters including disputes based on matters of law or contract interpretation. If
and to the extent these disputes arise, they could materially adversely affect us.
this limited sharing agreement would expire, and Chemours’
the indemnification provisions of
For further information about the Company’s litigation and other commitments and contingencies, see Item 3. Legal Proceedings and
our Note 20 to the Consolidated Financial Statements included elsewhere in this Annual Report.
We are subject to extensive environmental, health and safety laws and regulations that may result in unanticipated loss or
liability related to our current and past operations, which could reduce our profitability.
levels in numerous jurisdictions relating to pollution, protection of
Our operations and production facilities are subject to extensive environmental and health and safety laws and regulations at national,
international and local
the environment, climate change,
transporting and storing raw materials and finished products and storing and disposing of hazardous wastes. Such laws include, in the
U.S., the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, often referred to as Superfund), the
Resource Conservation and Recovery Act (RCRA) and similar state and global laws for management and remediation of hazardous
materials, the Clean Air Act (CAA) and the Clean Water Act, for protection of air and water resources, the Toxic Substances Control
Act (TSCA), and in the EU, the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), for regulation of
chemicals in commerce and reporting of potential known adverse effects and numerous local, state, federal and foreign laws and
regulations governing materials transport and packaging. If we are found to be in violation of these laws or regulations, which may be
subject to change based on legislative, scientific or other factors, we may incur substantial costs, including fines, damages, criminal or
civil sanctions, remediation costs, reputational harm, loss of sales or market access, or experience interruptions in our operations. We
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Summarized information on the Company’s pension benefit plans is as follows:
Change in benefit obligation
Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,103
$
Assumption and establishment of pension plans . . . . . . . . . . . . . . . . . . . . . . . . .
1,332
2016
2015
Service cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements & transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,105
Change in plan assets
Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,137
Assumption and establishment of pension plans . . . . . . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements & transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,169
Funded status at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
64
$
—
14
19
2
69
(36)
—
(3)
(12)
(2)
(49)
—
113
16
2
(36)
(12)
(51)
The net amounts recognized in the Consolidated Balance Sheet as of December 31, 2016 and 2015 consist of:
Noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
159
$
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1)
(94)
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
64
$
2016
2015
The accumulated benefit obligation for all pension plans was $1,042 and $1,030 as of December 31, 2016 and 2015, respectively.
The following information relates to pension plans with projected and accumulated benefit obligations in excess of the fair value of plan
assets at December 31, 2016 and 2015:
Pension plans with projected benefit obligation in excess of plan assets at December 31,
2016
2015
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
183
152
87
194
158
93
—
16
19
2
(76)
(39)
(24)
—
(6)
—
(121)
1,103
—
1,297
(7)
16
2
(39)
(6)
(126)
1,137
34
138
(2)
(102)
34
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
multi-employer pension expense allocated by DuPont to Chemours for the plans in which Chemours participated prior to separation.
The allocation of cost was based on active employee headcount and is included in the Consolidated Statement of Operations. These
amounts do not represent cash payments to DuPont or DuPont’s plans.
Plan Name
EIN / Pension
Number
Year Ended December 31,
2016
2015
2014
DuPont Pension and Retirement Plan (U.S.) . . . . . . . . . . . . . . . . . . . .
51-0014090/001
$
— $
All other U.S. and non-U.S. Plans . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
$
48
5
51
(1)
Single and Multiple Employer Plans
Beginning in the first quarter of 2015, Chemours has accounted for the plans covering its employees in the Netherlands and Taiwan as
a multiple employer plan and a single employer plan, respectively. In the third quarter of 2015, in connection with the separation,
additional plans in Germany, Belgium, Japan, Korea, Mexico and Switzerland were established. As of December 31, 2015, these plans
were all accounted for as single employer plans.
The net periodic benefit costs for the pension and amounts recognized in other comprehensive income for the years ended
December 31, 2016, 2015 and 2014 were as follows:
Year Ended December 31,
2016
2015
2014
Net periodic pension income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(28)
$
Net periodic pension cost (income):
Service cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Interest cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service (credit) cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailment gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in plan assets and benefit obligations recognized in other comprehensive loss
(income):
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service credit (cost) and curtailment gain . . . . . . . . . . . . . . . .
Effect of foreign exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total benefit recognized in other comprehensive income . . . . . . . . . . . . . . . . . . .
Total recognized in net periodic pension income and other comprehensive income . .
14
19
(63)
23
(1)
(2)
5
(5)
17
(28)
—
3
(15)
(23)
(28)
$
$
$
$
$
The pre-tax amounts recognized in accumulated other comprehensive loss are summarized below:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service credit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total amount recognized in accumulated other comprehensive loss . . . . . . . . . . . . .
336
(11)
325
$
$
363
(16)
347
The estimated pre-tax net loss and prior service credit for the defined benefit pension plans that will be amortized from accumulated
other comprehensive income (loss) into net periodic benefit cost during 2017 are $16 and $2, respectively.
Year Ended December 31,
2016
2015
2014
(83)
16
19
16
4
—
—
11
(16)
(24)
(4)
(33)
(66)
(94)
$
$
$
$
$
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
$
$
$
The Chemours Company
also may be subject to changes in our operations and production based on increased regulation or other changes to, or restrictions
imposed by, any such additional regulations. In addition, the manner in which adopted regulations (including environmental regulations)
are ultimately implemented may affect our products, the demand for and public perception of our products, the reputation of our brands,
our market access and our results of operations. In the event of a catastrophic incident involving any of the raw materials we use or
chemicals we produce, we could incur material costs as a result of addressing the consequences of such event and future reputational
costs associated with any such event.
locations. However, the ultimate costs under environmental
As a result of our operations, including the operations of divested businesses and certain discontinued operations, we could incur
substantial costs, including remediation and restoration costs. The costs of complying with complex environmental laws and regulations,
as well as internal voluntary programs, are significant and will continue to be significant for the foreseeable future. This includes costs
we expect to continue to incur for environmental investigation and remediation activities at a number of our current or former sites and
third-party disposal
these costs are difficult to
accurately predict. While we establish accruals in accordance with generally accepted accounting principles, the ultimate actual costs
and liabilities may vary from the accruals because the estimates on which the accruals are based depend on a number of factors (many
of which are outside of our control), including the nature of the matter and any associated third-party claims, the complexity of the site,
site geology, the nature and extent of contamination, the type of remedy, the outcome of discussions with regulatory agencies and other
Potentially Responsible Parties (PRPs) at multi-party sites and the number and financial viability of other PRPs. See “Environmental
Matters” within Item 7 — Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations for further
information and Note 20 to the Consolidated Financial Statements included elsewhere in this Annual Report.
laws and the timing of
There is also a risk that one or more of our key raw materials or one or more of our products may be found to have, or be characterized
as having, a toxicological or health-related impact on the environment or on our customers or employees or unregulated emissions,
which could potentially result in us incurring liability in connection with such characterization and the associated effects of any
toxicological or health-related impact. If such a discovery or characterization occurs, we may incur increased costs in order to comply
with new regulatory requirements or the relevant materials or products, including products of our customers incorporating our materials
or products, may be recalled or banned. Changes in laws, science or regulations, or their interpretation, and our customers’ perception
of such changes or interpretations may also affect the marketability of certain of our products.
The markets for many of our products have seasonally affected sales patterns.
The demand for TiO2, certain of our fluoroproducts and certain of our other products during a given year is subject to seasonal
fluctuations. As a result of seasonal fluctuations, our operating cash flow may be negatively impacted due to demand fluctuations. In
particular, because TiO2 is widely used in coatings, demand is higher in the painting seasons of spring and summer. Because certain
fluoroproducts are used in refrigerants, such products are in higher demand in the spring and summer in the Northern Hemisphere. We
may be adversely affected by anticipated or unanticipated changes in regional weather conditions. For example, poor weather
conditions in a region can lead to an abbreviated painting season, which can depress consumer sales of paint products that use TiO2,
which could have a negative effect on our cash position.
Failure to maintain effective internal controls could adversely affect our ability to meet our reporting requirements.
The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires, among other things, that we maintain effective internal control
over financial reporting and disclosure controls and procedures. One key aspect of the Sarbanes-Oxley Act is that we must perform
system and process evaluation and testing of our internal control over financial reporting to allow management and our independent
registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section
404 of the Sarbanes-Oxley Act, with auditor attestation of the effectiveness of our internal controls. If we are not able to comply with
the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in
our internal control over financial reporting that are deemed to be material weaknesses, the market price of our common shares could
decline and we could be subject to penalties or investigations by the NYSE, the SEC or other regulatory authorities, which would require
additional financial and management resources.
Effective internal controls are necessary for us to provide reasonable assurance with respect to our financial reports, and to effectively
prevent fraud. Internal controls over financial reporting may not prevent or detect misstatements because of
inherent limitations,
including the possibility of human error,
the circumvention or overriding of controls, or fraud. Therefore, even effective internal
controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. If we
cannot provide reasonable assurance with respect to our financial reports and effectively prevent fraud, our operating results could be
harmed. In addition, if we fail to maintain the effectiveness of our internal controls, including any failure to implement required new
or improved controls, or if we experience delay in the implementation of new or enhanced system, procedures and controls, or if we
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Fair Value of Derivative Instruments
3 to the Consolidated Financial Statements.
The table below presents the fair value of Chemours’ derivative assets and liabilities within the fair value hierarchy, as described in Note
Foreign currency forward contracts
Accounts and notes receivable – trade, net
Balance Sheet Location
Asset derivatives:
Total asset derivatives
Liability derivatives:
Total liability derivatives
Foreign currency forward contracts
Other accrued liabilities
Fair Value Using Level 2 Inputs
December 31,
December 31,
2016
2015
$
$
$
$
2 $
2 $
4 $
4 $
2
2
2
2
We classify our foreign currency forward contracts in Level 2 as the valuation inputs are based on quoted prices and market observable
data of similar instruments. For derivative assets and liabilities, standard industry models are used to calculate the fair value of the
various financial instruments based on significant observable market inputs, such as foreign exchange rates and implied volatilities
obtained from various market sources. Market inputs are obtained from well-established and recognized vendors of market data and
subjected to tolerance and quality checks.
Note 22. Long-Term Employee Benefits
Plans Covering Employees in the U.S.
Chemours sponsors a variety of employee benefit plans which cover substantially all U.S. employees. Prior to July 1, 2015, U.S.
employees generally participated in DuPont’s primary pension plan, the Retirement Savings Plan and certain other long-term employee
benefit plans. In conjunction with the separation on July 1, 2015, Chemours employees stopped participating in DuPont plans and
became participants in newly established Chemours plans. DuPont retained all liabilities related to its U.S. plans post-separation.
On July 1, 2015, Chemours established a defined contribution plan, similar in design to the DuPont Retirement Savings plan, which
covered all eligible U.S. employees. The purpose of the Plan is to encourage employees to save for their future retirement needs. The
plan is a tax qualified contributory profit sharing plan, with cash or deferred arrangement, and any eligible employee of Chemours may
participate. Chemours matches 100% of the first 6% of the employee’s contribution election. Chemours may also provide an additional
discretionary retirement savings contribution to eligible employees’ compensation. The amount of this contribution, if any, is at the sole
discretion of the Company. The plan’s matching contributions vest immediately upon contribution. The discretionary contribution vests
The Chemours Company
experience difficulties in their implementation, our business and operating results could be harmed, we could fail to meet our reporting
obligations, and there could be a material adverse effect on our stock price.
Effects of price fluctuations in energy and raw materials, our raw materials contracts and our inability to renew such
contracts, could have a significant impact on our earnings.
Our manufacturing processes consume significant amounts of energy and raw materials, the costs of which are subject to worldwide
supply and demand as well as other factors beyond our control. Variations in the cost of energy, which primarily reflect market prices for
oil and natural gas, and for raw materials may significantly affect our operating results from period to period. Additionally, consolidation
in the industries providing our raw materials may have an impact on the cost and availability of such materials. To the extent we do not
have fixed price contracts with respect to specific raw materials, we have no control over the costs of raw materials and such costs may
fluctuate widely for a variety of reasons, including changes in availability, major capacity additions or reductions, or significant facility
operating problems.
When possible, we have purchased, and we plan to continue to purchase, raw materials, including titanium bearing ores and fluorspar,
through negotiated medium- or long-term contracts to minimize the impact of price fluctuations. To the extent that we have been able to
achieve favorable pricing in our existing negotiated long-term contracts, we may not be able to renew such contracts at the current
prices, or at all, and this may adversely impact our cash flow from operations. However, to the extent that the prices of raw materials
that we utilize significantly decline, we may be bound by the terms of our existing long-term contracts and obligated to purchase such
raw materials at higher prices as compared to other market participants.
We attempt to offset the effects of higher energy and raw material costs through selling price increases, productivity improvements, and
cost reduction programs. However, the outcome of these efforts is largely determined by existing competitive and economic conditions,
and may be subject to a time delay between the increase in our raw materials costs and our ability to increase prices, which could vary
significantly depending on the market served. If we are not able to fully offset the effects of higher energy or raw material costs, it could
have a material adverse effect on our financial results.
Hazards associated with chemical manufacturing, storage and transportation could adversely affect our results of operations.
There are hazards associated with chemical manufacturing and the related storage and transportation of raw materials, products and
wastes. These hazards could lead to an interruption or suspension of operations and have an adverse effect on the productivity and
profitability of a particular manufacturing facility or on us as a whole. While we endeavor to provide adequate protection for the safe
handling of these materials, issues could be created by various events, including natural disasters, severe weather events, acts of
sabotage and performance by third parties, and as a result we could face the following potential hazards:
•
•
•
•
piping and storage tank leaks and ruptures;
mechanical failure;
employee exposure to hazardous substances; and
chemical spills and other discharges or releases of toxic or hazardous substances or gases.
for employees with at least three years of service.
These hazards may cause personal injury and loss of life, damage to property and contamination of the environment, which could lead
to government fines and penalties, work stoppage injunctions, claims and lawsuits by injured persons, damage to our public reputation
and brands, loss of sales and market access, customer dissatisfaction, and diminished product acceptance. If such actions are
determined adversely to us or there is an associated economic impact to our business, we may have inadequate insurance or cash flow
to offset any associated costs. Such outcomes could adversely affect our financial condition and results of operations.
In lieu of a defined benefit plan like DuPont’s primary pension plan, Chemours provides an enhanced 401(k) contribution for employees
who previously participated in DuPont’s pension plan. The enhanced benefits consist of an additional contribution of 1% to 7% of the
employee’s eligible compensation depending on the employee’s length of service with DuPont at the time of separation. The plan will
continue for a period up to 2019, subject to early termination.
The businesses in which we compete are highly competitive. This competition may adversely affect our results of operations
and operating cash flows.
Each of the businesses in which we operate is highly competitive. Competition in the performance chemicals industry is based on a
number of factors such as price, product quality and service. We face significant competition from major international and regional
competitors. Additionally, our Titanium Technologies business competes with numerous regional producers, including producers in
China, which have expanded their readily available production capacity during the previous five years. Additionally,
the risk of
substitution of Chinese producers by our customers could increase as they expand their use of chloride production technology. Some
competitors have announced plans to expand their chloride capacity.
Plans Covering Employees Outside the U.S.
Pension coverage for employees of Chemours non-U.S. subsidiaries is provided, to the extent deemed appropriate, through separate
plans established after separation and comparable to the DuPont plans in those countries. Obligations under such plans are funded by
depositing funds with trustees, covered by insurance contracts or are unfunded.
Participation in the Plans
Prior to July 1, 2015, Chemours participated in DuPont’s U.S. and non-U.S. plans, except for the plans in the Netherlands and Taiwan,
as though they were participants in a multi-employer plan with the other businesses of DuPont. The following table presents the
18
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Based on existing facts and circumstances, 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 the Company’s financial position, results of operations or cash
flows at any given year, as such obligation can be satisfied or settled over many years.
Note 21. Financial Instruments
Derivative Instruments
Objectives and Strategies for Holding Derivative Instruments
In the ordinary course of business, Chemours enters into contractual arrangements (derivatives) to reduce its exposure to foreign
currency risks. The Company has established a derivative program to be utilized for financial risk management. This program reflects
varying levels of exposure coverage and time horizons based on an assessment of risk. The derivative program has procedures
consistent with Chemours’ financial risk management policies and guidelines.
Foreign Currency Forward Contracts
Chemours uses foreign currency forward contracts to reduce its net exposure, by currency,
related to non-functional
currency-denominated monetary assets and liabilities of its operations so that exchange gains and losses resulting from exchange rate
changes are minimized. These derivative instruments are not part of a cash flow hedge program or a fair value hedge program, and
have not been designated as a hedge. Although all of the forward contracts are subject to an enforceable master netting agreement,
Chemours has elected to present the derivative assets and liabilities on a gross basis in the Consolidated Balance Sheets. No collateral
has been required for these contracts. All gains and losses resulting from the revaluation of the derivative assets and liabilities are
recognized in other income, net in the Consolidated Statements of Operations during the period in which they occurred.
At December 31, 2016, there were 45 forward exchange currency contracts outstanding with an aggregate gross notional value of
$518. Chemours recognized a net loss of $15 for the year ended December 31, 2016 and a net gain of $42 for the year ended
December 31, 2015, which is recorded in “other income, net” in the Consolidated Statements of Operations.
Net Investment Hedge — Foreign Currency Borrowings
Beginning on July 1, 2015, Chemours designated its €360 million Euro notes (see Note 19) as a hedge of its net investments in certain
of its international subsidiaries that use the Euro as functional currency in order to reduce the volatility in stockholders’ equity caused by
the changes in foreign currency exchange rates of the Euro with respect to the U.S. Dollar. Chemours uses the spot method to measure
the effectiveness of the net investment hedge. Under this method, for each reporting period, the change in the carrying value of the
Euro notes due to remeasurement of the effective portion is reported in accumulated other comprehensive loss in the Consolidated
Balance Sheet and the remaining change in the carrying value of the ineffective portion, if any, is recognized in other income, net in the
Consolidated Statements of Operations. Chemours evaluates the effectiveness of its net investment hedge quarterly at the beginning of
each quarter. Chemours did not record any ineffectiveness for the year ended December 31, 2016. The Company recognized a gain of
$14 and $8 for the years ended December 31, 2016 and 2015 on its net investment hedges within accumulated other comprehensive
income.
The Chemours Company
Our results of operations and financial condition could be seriously impacted by business disruptions and security breaches,
including cybersecurity incidents.
Business and/or supply chain disruptions, plant downtime and/or power outages and information technology system and/or network
disruptions, regardless of cause including acts of sabotage, employee error or other actions, geo-political activity, weather events and
natural disasters could seriously harm our operations as well as the operations of our customers and suppliers. Failure to effectively
prevent, detect and recover from security breaches, including attacks on information technology and infrastructure by hackers, viruses,
breaches due to employee error or actions or other disruptions could result in misuse of our assets, business disruptions, loss of
property including trade secrets and confidential business information, legal claims or proceedings, reporting errors, processing
inefficiencies, negative media attention, loss of sales and interference with regulatory compliance. Like most major corporations, we
have been and expect to be the target of industrial espionage, including cyber-attacks, from time to time. We have determined that
these attacks have resulted, and could result in the future, in unauthorized parties gaining access to certain confidential business
information, and have included the obtaining of trade secrets and proprietary information related to the chloride manufacturing process
for TiO2 by third parties. Although we do not believe that we have experienced any material losses to date related to these breaches,
there can be no assurance that we will not suffer any such losses in the future. We plan to actively manage the risks within our control
that could lead to business disruptions and security breaches. As these threats continue to evolve, particularly around cybersecurity, we
may be required to expend significant resources to enhance our control environment, processes, practices and other protective
measures. Despite these efforts, such events could materially adversely affect our business, financial condition or results of operations.
If our intellectual property were compromised or copied by competitors, or if our competitors were to develop similar or
superior intellectual property or technology, our results of operations could be negatively affected.
Intellectual property rights, including patents, trade secrets, confidential information, trademarks and tradenames are important to our
business. We endeavor to protect our intellectual property rights in key jurisdictions in which our products are produced or used and in
jurisdictions into which our products are imported. Our success depends to a significant degree upon our ability to protect and preserve
our intellectual property rights. However, we may be unable to obtain protection for our intellectual property in key jurisdictions. Although
we own and have applied for numerous patents and trademarks throughout the world, we may have to rely on judicial enforcement of
our patents and other proprietary rights. Our patents and other intellectual property rights may be challenged, invalidated, circumvented,
and rendered unenforceable or otherwise compromised. A failure to protect, defend or enforce our intellectual property could have an
adverse effect on our financial condition and results of operations. Similarly, third parties may assert claims against us and our
customers and distributors alleging our products infringe upon third party intellectual property rights.
We also rely materially upon unpatented proprietary technology, know-how and other trade secrets to maintain our competitive position.
While we maintain policies to enter into confidentiality agreements with our employees and third parties to protect our proprietary
expertise and other trade secrets, these agreements may not be enforceable or, even if legally enforceable, we may not have adequate
remedies for breaches of such agreements. We also may not be able to readily detect breaches of such agreements. The failure of our
patents or confidentiality agreements to protect our proprietary technology, know-how or trade secrets could result in significantly lower
revenues, reduced profit margins or loss of market share.
If we must take legal action to protect, defend or enforce our intellectual property rights, any suits or proceedings could result in
significant costs and diversion of resources and management’s attention, and we may not prevail in any such suits or proceedings. A
failure to protect, defend or enforce our intellectual property rights could have an adverse effect on our financial condition and results of
operations.
Restrictions under the intellectual property cross-license agreement could limit our ability to develop and commercialize
certain products and/or prosecute, maintain and enforce certain intellectual property.
We depend to a certain extent on DuPont to prosecute, maintain and enforce certain of the intellectual property licensed under the
intellectual property cross-license agreement. Specifically, DuPont is responsible for filing, prosecuting and maintaining patents that
DuPont licenses to us. DuPont also has the first right to enforce such patents, trade secrets and the know-how licensed to us by
DuPont. If DuPont fails to fulfill its obligations or chooses to not enforce the licensed patents, trade secrets or know-how under the
intellectual property cross-license agreement, we may not be able to prevent competitors from making, using and selling competitive
products (unless we are able to effectively exercise our secondary rights to enforce such patents, trade secrets and know-how).
the intellectual property cross-license agreement could limit our ability to develop and
In addition, our
commercialize certain products. For example, the licenses granted to us under the agreement may not extend to all new products,
services and businesses that we may enter in the future. These limitations and restrictions may make it more difficult, time consuming
restrictions under
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The Chemours Company
or expensive for us to develop and commercialize certain new products and services, or may result in certain of our products or
services being later to market than those of our competitors.
If we are unable to innovate and successfully introduce new products, or new technologies or processes reduce the demand
for our products or the price at which we can sell products, our profitability could be adversely affected.
Our industries and the end-use markets into which we sell our products experience periodic technological change and product
improvement. Our future growth will depend on our ability to gauge the direction of commercial and technological progress in key
end-use markets and on our ability to fund and successfully develop, manufacture and market products in such changing end-use
markets. We must continue to identify, develop and market innovative products or enhance existing products on a timely basis to
maintain our profit margins and our competitive position. We may be unable to develop new products or technology, either alone or with
third parties, or license intellectual property rights from third parties on a commercially competitive basis. If we fail to keep pace with the
evolving technological innovations in our end-use markets on a competitive basis, including with respect to innovation with regard to the
development of alternative uses for, or application of, products developed that utilize such end-use products, our financial condition and
results of operations could be adversely affected. We cannot predict whether technological innovations will, in the future, result in a
lower demand for our products or affect the competitiveness of our business. We may be required to invest significant resources to
adapt to changing technologies, markets, competitive environments and laws and regulations. We cannot anticipate market acceptance
of new products or future products. In addition, we may not achieve our expected benefits associated with new products developed to
meet new laws or regulations if the implementation of such laws or regulations is delayed.
In connection with our separation, we were required to assume, and indemnify DuPont for, certain liabilities. As we are
required to make payments pursuant to these indemnities to DuPont, we may need to divert cash to meet those obligations
and our financial results could be negatively affected. In addition, DuPont’s obligation to indemnify us for certain liabilities
may not be sufficient to insure us against the full amount of liabilities for which it will be allocated responsibility, and DuPont
may not be able to satisfy its indemnification obligations in the future.
Pursuant to the separation agreement, the employee matters agreement, the tax matters agreement and the intellectual property
cross-license agreement we entered into with DuPont prior to the spin-off, we were required to assume, and indemnify DuPont for,
certain liabilities. These indemnification obligations to date have included, among other items, defense costs associated with certain
litigation matters as well as certain damages awards, settlement amounts and penalties. In connection with MDL Settlement described
above under “Our results of operations could be adversely affected by litigation and other commitments and contingencies”, DuPont and
the MDL Settlement, to a limited sharing of potential future PFOA
Chemours agreed, subject to and following the completion of
liabilities (i.e., “indemnifiable losses,” as defined in the separation agreement between DuPont and Chemours) for a period of five years.
During that five-year period, Chemours would annually pay future PFOA liabilities up to $25 million and, if such amount is exceeded,
DuPont would pay any excess amount up to the next $25 million (which payment will not be subject to indemnification by Chemours),
with Chemours annually bearing any further excess liabilities under the terms of the separation agreement. After the five-year period,
this limited sharing agreement would expire, and Chemours’ indemnification obligations under the separation agreement would continue
unchanged. Chemours has also agreed that, upon the MDL Settlement becoming effective, it will not contest its liability to DuPont under
the separation agreement for PFOA liabilities on the basis of ostensible defenses generally applicable to the indemnification provisions
under the separation agreement, including defenses relating to punitive damages, fines or penalties or attorneys’ fees, and waives any
such defenses with respect to PFOA liabilities. Chemours has, however, retained defenses as to whether any particular PFOA claim is
within the scope of
the separation agreement. Payments pursuant to these indemnities may be
significant and could negatively impact our business, particularly indemnities relating to our actions that could impact the tax-free nature
of the distribution. In addition, in the event that DuPont seeks indemnification for adverse trial rulings or outcomes, these indemnification
claims could materially adversely affect our financial condition. Disputes between Chemours and DuPont may also arise with respect to
indemnification matters, including disputes based on matter of law or contract interpretation. If and to the extent these disputes arise,
they could materially adversely affect us.
the indemnification provisions of
Third parties could also seek to hold us responsible for any of
the DuPont businesses. DuPont has agreed to
indemnify us for such liabilities, but such indemnity from DuPont may not be sufficient to protect us against the full amount of such
liabilities, and DuPont may not be able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in
recovering from DuPont any amounts for which we are held liable, we may be temporarily required to bear these losses ourselves.
Each of these risks could negatively affect our business, financial condition, results of operations and cash flows. See Note 20 to the
Consolidated Financial Statements for further information.
the liabilities of
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
If the MDL Settlement does not proceed, any cases stayed or additional lawsuits may go to trial or appeal. An adverse ruling at trial or
on appeal could result in our incurring additional costs and liabilities, which are difficult to estimate beyond accrued amounts and involve
significant uncertainty due to the uniqueness of the individual MDL plaintiff’s claims and the defenses to those claims, both as to
potential liability and damages on an individual claim basis, and numerous unsettled legal issues, among other factors, such as general
versus specific causation, lack of specific fact discovery allowed to date on vast majority of the cases, lack of validation of basic facts
associated with plaintiffs and related claims, and the three cases tried to verdict to date did not inform of the many salient facts and
legal issues needed for assessment of the other cases. The appellate courts will rule on matters that have been tried. The Company
believes there are strong common and individual grounds for appealing these verdicts and, if any such verdict is overturned, any
subsequent verdict relying on such overturned ruling would likely also be overturned. The trials and appeals of the MDL matters will
occur over the course of many years. Significant unfavorable outcomes in a number of cases in the MDL could have a material adverse
effect on Chemours’ consolidated financial position, results of operations or cash flows.
There could also be new lawsuits filed related to DuPont’s use of PFOA, its manufacture of PFOA, or its customers use of DuPont
products that may not be within the scope of the MDL Settlement. Any such new litigation could also result in Chemours incurring
additional costs and liabilities. Management believes it is reasonably possible that the Company could incur losses related to other
PFOA matters in excess of amounts accrued but any such losses are not estimable at this time.
(d) U.S. Smelter and Lead Refinery, Inc.
Five lawsuits, including two putative class actions, were filed against DuPont by area residents concerning the U.S. Smelter and Lead
Refinery multi-party Superfund site in East Chicago, Indiana. Three of the lawsuits allege that Chemours is now responsible for DuPont
environmental
liabilities. The lawsuits include allegations for personal
injury damages, damages under
the Comprehensive
Environmental Response Compensation and Liability Act (“CERCLA”) and damages under the Fair Housing Act (“FHA”). At separation,
DuPont assigned Chemours its former plant site, which is located south of
the residential portion of
the Superfund area, and its
responsibility for the environmental remediation at the Superfund site. DuPont has requested that Chemours defend and indemnify it,
and Chemours has agreed to do so under a reservation of rights. Management believes a loss is reasonably possible but not estimable
at this time.
Environmental
Chemours, by virtue of
its status as a subsidiary of DuPont prior to the separation,
is 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 by Chemours or other parties. Chemours accrues for environmental remediation
activities consistent with the policy set forth in Note 3. Much of this liability results from the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA, often referred to as Superfund), RCRA and similar state and global laws. These laws require
Chemours to undertake certain investigative, remediation and restoration activities at sites where Chemours conducts or once
conducted operations or at sites where Chemours-generated waste was disposed. The accrual also includes estimated costs related to
a number of sites identified for which it is probable that environmental remediation will be required, but which are not currently the
subject of enforcement activities.
At December 31, 2016 and 2015, the Consolidated Balance Sheets included a liability relating to these matters of $278 and $297,
respectively, which, in management’s opinion, is appropriate based on existing facts and circumstances. The time-frame for a site to go
through all phases of remediation (investigation and active clean-up) may take about 15 to 20 years, followed by several years of
on-going maintenance and monitoring (“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, diverse regulatory requirements, as well as the presence or absence of other potentially responsible
parties. In addition, for claims that Chemours may be required to indemnify DuPont pursuant to the separation-related agreements,
Chemours, through DuPont, has limited available information for certain sites or is in the early stages of discussions with regulators. For
these sites in particular 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 $535 above the amount accrued at December 31, 2016.
For the years ended December 31, 2016, 2015, and 2014, Chemours incurred environmental remediation expenses of $44, $38, and
$59, respectively.
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Litigation and Procedural Posture Prior to Stay of MDL Litigation
All six bellwether cases in the MDL have now been tried, resolved, appealed or otherwise addressed. Two bellwether cases have been
tried. The first case (Bartlett v. DuPont / kidney cancer) was tried to a verdict in October 2015. The jury found in favor of the plaintiff,
awarding $1.1 in damages for negligence and $0.5 for emotional distress. The jury found that DuPont’s conduct did not warrant punitive
damages. A second case (Freeman v. DuPont / testicular cancer) was tried to verdict in July 2016. The jury found in favor of the plaintiff
awarding $5.1 in compensatory damages and $0.5 in punitive damages and attorneys’ fees. Plaintiff’s counsel alleges that they are
entitled to at least $6.9 in attorneys’ fees and costs for the Freeman trial. Absent the Stay of MDL Litigation, the Court would make a
determination after post-trial submissions by the parties. The Court’s determination would be subject to appeal. Court rulings made
before and during both trials resulted in several significant grounds for appeal and an appeal to the Sixth Circuit has been filed for the
first case. Oral argument on the appeal of the first case was held in December 2016. The Company, through DuPont, is pursuing
post-trial motions and appeals for the second case.
Three bellwether PFOA cases were settled in 2016 as trial approached. These cases (Wolf v. DuPont / ulcerative colitis, Dowdy v.
DuPont / kidney cancer, Baker v. DuPont / kidney cancer) were settled for amounts well below the incremental cost of preparing for
trials. To date, the settlements have been individually and in aggregate immaterial to the Company. The final case (Pugh v. DuPont /
ulcerative colitis) was removed from the bellwethers when it was determined that the plaintiff did not suffer from the alleged disease.
The trial court announced that, starting in May 2017, 40 individual plaintiff trials will be scheduled for a 12-month period. Following the
conclusion of the six bellwether cases, on July 19, 2016, the court moved two of the 40 matters (Vigneron v. DuPont / testicular cancer
and Moody v. DuPont / testicular cancer) forward and set the cases for trial on November 14, 2016 and January 17, 2017, respectively.
The trial court’s multi-year plan pertains only to the approximately 270 cases claiming cancer. Based on the current plan, the remaining
cases, comprising approximately 93% of the docket, will remain inactive.
The November 2016 trial (Vigneron v. DuPont / testicular cancer) resulted in a verdict in favor of the Plaintiff for $2 in compensatory
damages, $10.5 in punitive damages, and attorney’s fees and costs. Absent the Stay of MDL Litigation, the Company, through DuPont,
will pursue post-trial motions and appeals. The January 2017 trial (Moody v. DuPont / testicular cancer) commenced in the first quarter
of 2017 but was stayed pending the MDL Settlement and its implementation.
A confidential mediation process was established by the court early in this MDL.
Chemours, through DuPont, denies the allegations in these lawsuits and is defending itself vigorously. The MDL Settlement was entered
into solely by way of compromise and settlement and is not in any way an admission of liability or fault by DuPont or Chemours. No
other claims in the MDL have been settled or resolved during the periods presented.
Settlement between DuPont and Chemours related to MDL
DuPont and Chemours have also agreed, subject to and following the completion of
the MDL Settlement, to a limited sharing of
potential future PFOA liabilities (i.e., “indemnifiable losses,” as defined in the separation agreement between DuPont and Chemours) for
a period of five years. During that five-year period, Chemours would annually pay future PFOA liabilities up to $25 million and, if such
amount
is exceeded, DuPont would pay any excess amount up to the next $25 million (which payment will not be subject
to
indemnification by Chemours), with Chemours annually bearing any further excess liabilities under the terms of
the separation
agreement. After the five-year period, this limited sharing agreement would expire, and Chemours’ indemnification obligations under the
separation agreement would continue unchanged. Chemours has also agreed that, upon the MDL Settlement becoming effective, it will
not contest its liability to DuPont under the separation agreement for PFOA liabilities on the basis of ostensible defenses generally
applicable to the indemnification provisions under the separation agreement, including defenses relating to punitive damages, fines or
penalties or attorneys’ fees, and waives any such defenses with respect to PFOA liabilities. Chemours has, however, retained defenses
as to whether any particular PFOA claim is within the scope of the indemnification provisions of the separation agreement.
PFOA Summary
While it is probable that the Company will incur costs related to the medical monitoring program discussed above, such costs cannot be
reasonably estimated due to uncertainties surrounding the level of participation by eligible class members and the scope of testing.
Chemours has accrued $335 million associated with the MDL Settlement at December 31, 2016.
The Chemours Company
In connection with our separation, we were required to enter into numerous separation-related and commercial agreements
with our former parent company, DuPont, which may not reflect optimal or commercially beneficial terms to Chemours.
Commercial agreements we entered into with DuPont in connection with the separation were negotiated in the context of the separation
while we were still a wholly-owned subsidiary of DuPont. Accordingly, during the period in which the terms of those agreements were
negotiated, we did not have an independent board of directors or management
independent of DuPont. Certain commercial
agreements, having long terms and commercially advantageous cancellation and assignment rights to DuPont, may not include
adjustments for changes in industry and market conditions. There is a risk that the pricing and other terms under these agreements may
not be commercially beneficial and may not be able to be renegotiated in the future. The terms relate to, among other things, the
allocation of assets, liabilities, rights and obligations, including the provision of products and services and the sharing and operation of
property, manufacturing, office and laboratory sites, and other commercial rights and obligations between DuPont and us.
We may be unable to make, on a timely or cost-effective basis, the changes necessary to operate efficiently as an independent
company.
There is a risk that, since separating from DuPont, we are more susceptible to market fluctuations and other adverse events than we
would have been if we were still a part of DuPont’s organizational structure. As part of DuPont, we were able to enjoy certain benefits
from DuPont’s operating diversity, purchasing power and opportunities to pursue integrated strategies with DuPont’s other businesses.
As an independent, publicly traded company, we do not have similar diversity or integration opportunities and do not have similar
purchasing power or access to capital markets. Additionally, as part of DuPont, we were able to leverage the DuPont historical market
reputation and performance and brand identity to recruit and retain key personnel to run our business. As an independent, publicly
traded company, we do not have the same historical market reputation and performance or brand identity as DuPont and it may be more
difficult for us to recruit or retain such key personnel.
Our ability to make future strategic decisions regarding our manufacturing operations are subject
to regulatory,
environmental, political, legal and economic risks, and to certain extent may be subject to consents or cooperation from
DuPont under the agreements entered into between us and DuPont as part of the separation. These could adversely affect our
ability to execute our future strategic decisions and our results of operations and financial condition.
One of the ways we may improve our business is through the expansion or improvement of our existing facilities, such as the expansion
of our Altamira TiO2 facility and the planned expansions for our Opteon™ refrigerant and our Mining Solutions facility. Construction of
additions or modifications to facilities involves numerous regulatory, environmental, political, legal and economic uncertainties that are
beyond our control. Such expansion or improvement projects may also require the expenditure of significant amounts of capital, and
financing may not be available on economically acceptable terms or at all. As a result, these projects may not be completed on
schedule, at the budgeted cost, or at all. Moreover, our revenue may not increase immediately upon the expenditure of funds on a
particular project. As a result, we may not be able to realize our expected investment return, which could adversely affect our results of
operations and financial condition.
We periodically assess our manufacturing operations in order to manufacture and distribute our products in the most efficient manner.
Based on our assessments, we may make strategic decisions regarding our manufacturing operations such as capital improvements to
modernize certain units, move manufacturing or distribution capabilities from one plant or facility to another plant or facility, discontinue
manufacturing or distributing certain products or close or divest all or part of a manufacturing plant or facility, some of which have
significant shared services and lease agreements with DuPont. These agreements may adversely impact our ability to take these
strategic decisions regarding out manufacturing operations. Further, if such agreements are terminated or revised, we would have to
assess and potentially adjust our manufacturing operations, the closure or divestiture of all or part of a manufacturing plant or facility
that could result in future charges that could be significant.
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Our customers, prospective customers, suppliers or other companies with whom we conduct business may need assurances
that our financial stability is sufficient to satisfy their requirements for doing or continuing to do business with them.
The Chemours Company
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Some of our customers, prospective customers, suppliers or other companies with whom we conduct business may need assurances
that our financial stability is sufficient to satisfy their requirements for doing or continuing to do business with them, and may require us
to provide additional credit support, such as letters of credit or other financial guarantees. Any failure of parties to be satisfied with our
financial stability could have a material adverse effect on our business, financial condition, results of operations and cash flows.
evidence on whether any probable link exists, as defined in the settlement agreement, between exposure to PFOA and human disease.
The C8 Science Panel
found probable links, as defined in the settlement agreement, between exposure to PFOA and
pregnancy-induced hypertension,
including preeclampsia, kidney cancer,
testicular cancer,
thyroid disease, ulcerative colitis and
diagnosed high cholesterol.
We are a holding company that is dependent on cash flows from our operating subsidiaries to fund our debt obligations,
capital expenditures and ongoing operations.
All of our operations are conducted and all of our assets are owned by our operating companies, which are our subsidiaries. We intend
to continue to conduct our operations at the operating companies and any future subsidiaries. Consequently, our cash flow and our
ability to meet our obligations or make cash distributions depends upon the cash flow of our operating companies and any future
subsidiaries, and the payment of funds by our operating companies and any future subsidiaries in the form of dividends or otherwise.
The ability of our operating companies and any future subsidiaries to make any payments to us depends on their earnings, the terms of
their indebtedness, including the terms of any credit facilities, and legal restrictions regarding the transfer of funds.
Our debt is generally the exclusive obligation of The Chemours Company and our guarantor subsidiaries. Because a significant portion
of our operations are conducted by nonguarantor subsidiaries, our cash flow and our ability to service indebtedness, including our
ability to pay the interest on our debt when due and principal of such debt at maturity, are dependent to a large extent upon cash
dividends and distributions or other transfers from such nonguarantor subsidiaries. Any payment of dividends, distributions, loans or
advances by our nonguarantor subsidiaries to us could be subject to restrictions on dividends or repatriation of earnings under
applicable local
law, monetary transfer restrictions and foreign currency exchange regulations in the jurisdictions in which our
subsidiaries operate, and any restrictions imposed by the current and future debt instruments of our nonguarantor subsidiaries. In
addition, payments to us by our subsidiaries are contingent upon our subsidiaries’ earnings.
Our subsidiaries are separate legal entities and, except for our guarantor subsidiaries, have no obligation, contingent or otherwise, to
pay any amounts due on our debt or to make any funds available for those amounts, whether by dividends, loans, distributions or other
payments, and do not guarantee the payment of interest on, or principal of, our debt. Any right that we have to receive any assets of any
of our subsidiaries that are not guarantors upon the liquidation or reorganization of any such subsidiary, and the consequent right of
holders of notes to realize proceeds from the sale of their assets, will be structurally subordinated to the claims of that subsidiary’s
creditors, including trade creditors and holders of debt issued by that subsidiary.
If our long-lived assets become impaired, we may be required to record a significant charge to earnings.
We have a significant amount of long-lived assets on our consolidated balance sheet. Under U.S. GAAP, we review our long-lived assets
for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Factors that may be
considered a change in circumstances, indicating that the carrying value of our long-lived assets may not be recoverable, include, but
are not limited to, changes in the industries in which we operate, particularly the impact of a downturn in the global economy, as well as
competition or other factors leading to reduction in expected long-term sales or profitability. We may be required to record a significant
noncash charge in our financial statements during the period in which any impairment of our long-lived assets is determined, negatively
impacting our results of operations.
In May 2013, a panel of three independent medical doctors released its initial recommendations for screening and diagnostic testing of
eligible class members. In September 2014, the medical panel recommended follow-up screening and diagnostic testing three years
after initial testing, based on individual results. The medical panel has not communicated its anticipated schedule for completion of its
protocol. Through DuPont, Chemours is obligated to fund up to $235 for a medical monitoring program for eligible class members and,
in addition, administrative cost associated with the program, including class counsel fees. In January 2012, Chemours, through DuPont,
put $1 in an escrow account to fund medical monitoring as required by the settlement agreement. The court-appointed Director of
Medical Monitoring has established the program to implement the medical panel’s recommendations and the registration process, as
well as eligibility screening, is ongoing. Diagnostic screening and testing has begun and associated payments to service providers are
being disbursed from the escrow account. As of December 31, 2016, less than $1 has been disbursed from the escrow account related
to medical monitoring.
In addition, under the settlement agreement, DuPont must continue to provide water treatment designed to reduce the level of PFOA in
water to six area water districts and private well users. At separation, this obligation was assigned to Chemours, which is included in the
accrual amounts recorded as of December 31, 2016.
Class members may pursue personal injury claims against DuPont only for those human diseases for which the C8 Science Panel
determined a probable link exists. At December 31, 2016 and 2015, there were approximately 3,500 lawsuits filed in various federal and
state courts in Ohio and West Virginia, an increase of approximately 600 over year end 2014. These lawsuits are consolidated in an
MDL in Ohio federal court. Based on the information currently available to the Company, the majority of the lawsuits allege personal
injury claims associated with high cholesterol and thyroid disease from exposure to PFOA in drinking water. There are 30 lawsuits
alleging wrongful death.
Although the majority of the plaintiffs in the MDL allege multiple diseases, the table below approximates the number of plaintiffs in each
of the six probable link disease categories.
Alleged Injury
Kidney cancer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Testicular cancer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ulcerative colitis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preeclampsia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thyroid disease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
High cholesterol
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In the third quarter of 2014, six plaintiffs from the MDL were selected for individual bellwether trials.
Approximate
Number of
Plaintiffs
200
70
300
200
1,430
1,340
Our failure to comply with the anti-corruption laws of
negatively impact our reputation and results of operations.
the United States and various international
jurisdictions could
Settlement of MDL between DuPont and MDL Plaintiffs
Doing business on a global basis requires us to comply with the laws and regulations of the U.S. government and those of various
international and sub-national jurisdictions, and our failure to successfully comply with these rules and regulations may expose us to
liabilities. These laws and regulations apply to companies, individual directors, officers, employees and agents, and may restrict our
operations, trade practices, investment decisions and partnering activities. In particular, our international operations are subject to U.S.
and foreign anti-corruption laws and regulations, such as the U.S. Foreign Corrupt Practices Act (the “FCPA”), the United Kingdom
Bribery Act 2010 (the “Bribery Act”) as well as anti-corruption laws of the various jurisdictions in which we operate. The FCPA, the
Bribery Act and other laws prohibit us and our officers, directors, employees and agents acting on our behalf from corruptly offering,
influencing official decisions or
promising, authorizing or providing anything of value to foreign officials for the purposes of
obtaining or retaining business or otherwise obtaining favorable treatment. Our global operations may expose us to the risk of
violating, or being accused of violating, the foregoing or other anti-corruption laws. Such violations could be punishable by criminal
fines, imprisonment, civil penalties, disgorgement of profits, injunctions and exclusion from government contracts, as well as other
On February 11, 2017, DuPont entered into an agreement in principle with plaintiffs’ counsel representing the MDL plaintiffs providing
for a global settlement of all cases and claims in the MDL, including all filed and unfiled personal injury cases and claims that are part of
the plaintiffs’ counsel’s claim inventory, as well as cases that have been tried to a jury verdict (the “MDL Settlement”). The total
settlement amount is $670.7 million dollars in cash, half of which will be paid by Chemours and half paid by DuPont. DuPont’s payment
would not be subject to indemnification or reimbursement by Chemours, and Chemours has accrued $335 million associated with this
matter at December 31, 2016. In exchange for payment of the total settlement amount, DuPont and Chemours will receive a complete
release of all claims by the settling plaintiffs. The MDL Settlement was entered into solely by way of compromise and settlement and is
not in any way an admission of liability or fault by DuPont or Chemours. The MDL Settlement is not subject to court approval; however,
the MDL Settlement may not proceed in certain conditions, including a walk-away right that enables DuPont to terminate the MDL
Settlement if more than a specified number of plaintiffs determine not to participate. In connection with the MDL Settlement, DuPont
and MDL plaintiffs’ counsel have sought a stay (the “Stay of MDL Litigation”) of all judicial proceedings related to this action in the
federal district court and in the U.S. Court of Appeals for the Sixth Circuit. If the MDL Settlement is terminated or otherwise does not
proceed, additional lawsuits may go to trial or appeal.
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
In the separation, DuPont assigned its Benzene docket to Chemours. At December 31, 2016 and 2015, there are 27 and 29 cases
pending against DuPont alleging benzene-related illnesses. These cases consist of premises matters involving contractors and
deceased former employees who claim exposure to benzene while working at DuPont sites primarily in the 1960s through the 1980s,
Through DuPont, Chemours has received a claim by Phillips66 for indemnity and defense for three matters arising at a former DuPont /
Conoco Texas site. Phillips66 seeks reimbursement for its settlement and fees in one matter and assumption of the defense in two
A benzene case (Hood v. DuPont) was tried to a verdict in Texas state court on October 20, 2015. Plaintiffs alleged that Mr. Hood’s
Acute Myelogenous Leukemia (AML) was the result of 24 years of occupational exposure to trace benzene found in DuPont automotive
paint products and that DuPont negligently failed to warn him that its paints, reducers and thinners contained benzene that could cause
cancer or leukemia. The jury found in the Plaintiffs favor awarding $6.9 in compensatory damages and $1.5 in punitive damages. In
March 2016, acting on the Company’s motion, the Court struck the punitive award. Through DuPont, Chemours has filed an appeal on
the remaining award based upon substantial errors made at the trial court level. Plaintiffs have filed a cross appeal.
Management believes that a loss is reasonably possible related to these matters; however, given the evaluation of each Benzene matter
is highly fact driven and impacted by disease, exposure and other factors, a range of such losses cannot be reasonably estimated at
(b) Benzene
matters.
this time.
(c) PFOA
Prior to the fourth quarter of 2014, the performance chemicals segment of DuPont made PFOA (collectively, perfluorooctanoic acids
and its salts, including the ammonium salt) at its Fayetteville plant (Fayetteville, North Carolina) and used PFOA as a processing aid in
the manufacture of fluoropolymers and fluoroelastomers at certain sites including: Washington Works (Parkersburg, West Virginia),
Chambers Works (Deepwater, New Jersey), Dordrecht Works (Netherlands), Changshu Works (China), and Shimizu (Japan). These
sites are now owned and/or operated by Chemours.
Chemours recorded accruals of $349 and $20 related to the PFOA matters discussed below at December 31, 2016 and 2015,
respectively. In the fourth quarter of 2016, the Company recorded an approximately $335 accrual related to the PFOA MDL settlement,
which is further discussed below.
The accruals also include charges related to DuPont’s obligations under agreements with the U.S. Environmental Protection Agency
(EPA) and voluntary commitments to the New Jersey Department of Environmental Protection (NJDEP). These obligations and
voluntary commitments include surveying, sampling and testing drinking water in and around certain company sites offering treatment
or an alternative supply of drinking water if tests indicate the presence of PFOA in drinking water at or greater than the national Health
Advisory. A provisional health advisory level was set in 2009 at 0.4 parts per billion (ppb) that includes PFOA in drinking water. In
May 2016, the EPA announced a health advisory level of 0.07 ppb that includes PFOA in drinking water. As a result, we recorded an
additional $4 in the second quarter of 2016 based on management’s best estimate of the impact of the new health advisory level on the
company’s obligations to the EPA, which have expanded the testing and water supply commitments previously established. Based on
prior testing, the Company has initiated additional testing and treatment in certain additional locations in and around Chambers Works
and Washington Works plants. The Company will continue to work with the EPA regarding the extent of work that may be required with
respect to these matters.
Drinking Water Actions
In August 2001, a class action, captioned Leach v. DuPont, was filed in West Virginia state court alleging that residents living near the
Washington Works facility had suffered, or may suffer, deleterious health effects from exposure to PFOA in drinking water.
DuPont and attorneys for the class reached a settlement in 2004 that binds about 80,000 residents. In 2005, DuPont paid the plaintiffs’
attorneys’ fees and expenses of $23 and made a payment of $70, which class counsel designated to fund a community health project.
Chemours, through DuPont, funded a series of health studies which were completed in October 2012 by an independent science panel
of experts (the C8 Science Panel). The studies were conducted in communities exposed to PFOA to evaluate available scientific
and product liability claims based on alleged exposure to benzene found in trace amounts in aromatic hydrocarbon solvents used to
Risks Related to Our Indebtedness
manufacture DuPont products, such as paints, thinners and reducers.
The Chemours Company
remedial measures. Investigations of alleged violations can be very expensive, disruptive, and damaging to our reputation. Although we
have implemented anti-corruption policies and procedures since the separation, there can be no guarantee that these policies,
procedures, and training will effectively prevent violations by our employees or representatives in the future. Additionally, we face a risk
that our distributors and other business partners may violate the FCPA, the Bribery Act or similar laws or regulations. Such violations
could expose us to FCPA and Bribery Act liability and/or our reputation may potentially be harmed by their violations and resulting
sanctions and fines.
Our significant indebtedness could adversely affect our financial condition, and we could have difficulty fulfilling our
obligations under our indebtedness, which may have a material adverse effect on us.
As of December 31, 2016, we had approximately $3.6 billion of indebtedness. At December 31, 2016, together with the guarantors, we
had approximately $1.4 billion of senior secured indebtedness outstanding, and had an additional $750 million of capacity under the
Revolving Credit Facility, all of which would be senior secured indebtedness if drawn. Our significant level of indebtedness increases
the risk that we may be unable to generate cash sufficient to pay amounts due in respect of our indebtedness. The level of our
indebtedness could have other important consequences on our business, including:
•
•
•
•
•
•
•
•
•
making it more difficult for us to satisfy our obligations with respect to indebtedness;
increasing our vulnerability to adverse changes in general economic, industry and competitive conditions;
requiring us to dedicate a significant portion of our cash flow from operations to make payments on our indebtedness, thereby
reducing the availability of our cash flow to fund working capital and other general corporate purposes;
limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
restricting us from capitalizing on business opportunities;
placing us at a competitive disadvantage compared to our competitors that have less debt;
limiting our ability to borrow additional funds for working capital, acquisitions, debt service requirements, execution of our
business strategy or other general corporate purposes;
limiting our ability to enter into certain commercial arrangements because of concerns of counterparty risks; and
limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our
competitors that have less debt.
The occurrence of any one or more of these circumstances could have a material adverse effect on us.
Despite our significant level of
transactions which could further exacerbate the risks to our financial condition described above.
indebtedness, we may be able to incur substantially more debt and enter into other
Notwithstanding our significant level of indebtedness, we may be able to incur significant additional indebtedness in the future, including
additional secured indebtedness that would be effectively senior to the notes (including up to $750 million of available capacity under
the Revolving Credit Facility). Although the indenture that governs the notes and the credit agreement that governs the Senior Secured
Credit Facilities contain restrictions on our ability to incur additional indebtedness and to enter into certain types of other transactions,
these restrictions are subject to a number of significant qualifications and exceptions. Additional indebtedness incurred in compliance
with these restrictions, including secured indebtedness, could be substantial. These restrictions also do not prevent us from incurring
obligations, such as trade payables, that do not constitute indebtedness as defined under our debt instruments. To the extent such new
debt is added to our current debt levels, the substantial leverage risks described in the immediately preceding risk factor would increase.
We may need additional capital in the future and may not be able to obtain it on favorable terms.
Our industry is capital intensive, and we may require additional capital in the future to finance our growth and development, implement
further marketing and sales activities, fund ongoing research and development activities and meet general working capital needs. Our
capital requirements will depend on many factors, including acceptance of and demand for our products, the extent to which we invest
these developments, as well as general
in new technology and research and development projects, and the status and timing of
availability of capital from debt and/or equity markets.
However, debt or equity financing may not be available to us on terms we find acceptable, if at all. Also, regardless of the terms of
our debt or equity financing, our agreements and obligations under the tax matters agreement may limit our ability to issue stock. For a
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The Chemours Company
more detailed discussion, see risk factor “We agreed to numerous restrictions to preserve the tax-free treatment of the transactions in
the U.S., which may reduce our strategic and operating flexibility.” If we are unable to raise additional capital when needed, our financial
condition could be materially and adversely affected.
Additionally, our failure to maintain the credit ratings on our debt securities, including the notes, could negatively affect our ability to
access capital and could increase our interest expense on future indebtedness. We expect the credit rating agencies to periodically
review our capital structure and the quality and stability of our earnings. Deterioration in our capital structure or the quality and stability
of our earnings could result in a downgrade of the credit ratings on our debt securities. Any negative rating agency actions could
constrain the capital available to us, reduce or eliminate available borrowing to us and could limit our access to and/or increase the cost
of funding our operations. If, as a result, our ability to access capital when needed becomes constrained, our interest costs could
increase, which could have material adverse effect on our results of operations, financial condition and cash flows.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to
increase significantly.
Our borrowings under the Senior Secured Credit Facilities are at variable rates and expose us to interest rate risk. As a result, if interest
rates increase, our debt service obligations under the Senior Secured Credit Facilities or other variable rate debt would increase even
though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our
indebtedness, would correspondingly decrease. As of December 31, 2016, we had approximately $1.4 billion of our outstanding debt at
variable interest rates.
We may be unable to service our indebtedness, including the notes.
Our ability to make scheduled payments on and to refinance our indebtedness, including the notes, depends on and is subject to our
financial and operating performance, which in turn is affected by general and regional economic, financial, competitive, business and
other factors (many of which are beyond our control), including the availability of financing in the international banking and capital
markets. We cannot be certain that our business will generate sufficient cash flow from operations or that future borrowings will be
available to us in an amount sufficient to enable us to service our debt, including the notes, to refinance our debt or to fund our other
liquidity needs.
If we are unable to meet our debt service obligations or to fund our other liquidity needs, we will need to restructure or refinance all or a
portion of our debt, including the notes. Failure to successfully restructure or refinance our debt could cause us to default on our debt
obligations and would impair our liquidity. Our ability to restructure or refinance our debt will depend on the condition of the capital
markets and our financial condition at such time. Any refinancing of our indebtedness could be at higher interest rates and may require
us to comply with more onerous covenants that could further restrict our business operations.
Litigation
Moreover, in the event of a default of our debt service obligations, the holders of the applicable indebtedness, including the notes and
the Senior Secured Credit Facilities, could elect to declare all the funds borrowed to be due and payable, together with accrued and
unpaid interest. We cannot be certain that our assets or cash flows would be sufficient to fully repay borrowings under our outstanding
debt instruments if accelerated upon an event of default. First, a default in our debt service obligations in respect of the notes would
result in a cross default under the Senior Secured Credit Facilities. The foregoing would permit the lenders under the Revolving Credit
Facility to terminate their commitments thereunder and cease making further loans, and would allow the lenders under the Senior
Secured Credit Facilities to declare all
loans immediately due and payable and to institute foreclosure proceedings against their
collateral, which could force us into bankruptcy or liquidation. Second, any event of default or declaration of acceleration under the
Senior Secured Credit Facilities or any other agreements relating to our outstanding indebtedness under which the total amount of
outstanding indebtedness exceeds $100 million could also result in an event of default under the indenture governing the notes, and
any event of default or declaration of acceleration under any other of our outstanding indebtedness may also contain a cross-default
provision. Any such default, event of default or declaration of acceleration could materially and adversely affect our results of operation
and financial condition.
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
history for counterparties that do not have published credit ratings. For counterparties without an external rating or available credit history,
a cumulative average default rate is used.
(b) Operating Leases
2015 and 2014, respectively.
Asset Retirement Obligations
obligations is as follows:
(Dollars in millions)
Chemours uses various leased facilities and equipment in its operations. The terms for these leased assets vary depending on the
lease agreement. Future minimum lease payments (including residual value guarantee amounts) under non-cancelable operating
leases are $62, $53, $46, $23 and $31 for the years ended December 31, 2017, 2018, 2019, 2020 and 2021, respectively, and $43 for
the years thereafter. Net rental expense under operating leases was $68, $83 and $75 during the years ended December 31, 2016,
Chemours has recorded asset retirement obligations primarily associated with closure, reclamation and removal costs for mining
operations related to the production of TiO2 in the Titanium Technologies segment. A summary of the changes in asset retirement
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Accretion expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements/payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
42
2
(1)
43
2
41
$
$
$
$
43
1
(2)
42
1
41
Year Ended December 31,
2016
2015
In addition to the matters discussed below, Chemours, by virtue of its status as a subsidiary of DuPont prior to the separation, is subject
to or required under the separation-related agreements executed prior to the separation to indemnify DuPont against various pending
legal proceedings arising out of
the normal course of
the Chemours business including product
liability,
intellectual property,
commercial, environmental and antitrust lawsuits. It is not possible to predict the outcome of these various proceedings. Except for the
PFOA litigation for which a separate assessment is provided in this Note, while management believes it is reasonably possible that
Chemours could incur losses in excess of the amounts accrued, if any, for the aforementioned proceedings, it does not believe any
such loss would have a material impact on Chemours’ consolidated financial position, results of operations or liquidity. With respect to
the litigation matters discussed below, including PFOA multi-district litigation (“MDL”), management’s estimate of the probability of loss
in excess of the amounts accrued, if any, is addressed individually for each matter. In the event that DuPont seeks indemnification for
adverse trial rulings or outcomes for any such matter relating to PFOA, these indemnification claims could materially adversely affect
Chemours’ financial condition. Disputes between Chemours and DuPont may also arise with respect to indemnification matters,
including disputes based on matters of law or contract interpretation. If and to the extent these disputes arise, they could materially
adversely affect Chemours.
(a) Asbestos
At December 31, 2016 and 2015, there were approximately 1,900 lawsuits and 2,200 lawsuits, respectively, pending against DuPont
alleging personal injury from exposure to asbestos. These cases are pending in state and federal court in numerous jurisdictions in the
U.S. and are individually set for trial. A small number of cases are pending outside the U.S. Most of
the actions were brought by
contractors who worked at sites between 1950 and the 1990s. A small number of cases involve similar allegations by DuPont
employees. A limited number of the cases were brought by household members of contractors or DuPont employees. Finally, certain
lawsuits allege personal injury as a result of exposure to DuPont products.
At December 31, 2016 and 2015, Chemours had an accrual of $41 and $44 related to this matter, respectively. Chemours reviews this
estimate and related assumptions quarterly. Management believes that the likelihood is remote that Chemours would incur losses in
excess of the amounts accrued in connection with this matter.
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
The agreements governing our indebtedness restrict our current and future operations, particularly our ability to respond to
changes or to take certain actions.
The Chemours Company
in the case of
the Revolving Credit Facility,
The agreements governing our indebtedness, including the notes, contain, and the agreements governing future indebtedness and
financial
future debt securities may contain, significant restrictive covenants and,
maintenance covenants that will
limit our operations, including our ability to engage in activities that may be in our long-term best
interests. These restrictive covenants may limit us, and our restricted subsidiaries, from taking, or give rights to the holders of our
indebtedness in the event of the following actions:
forth in the Indenture, including without limitation, reinvestment rights with respect to the proceeds of asset dispositions. Chemours is
permitted to redeem some or all of the 2023 Notes and Euro Notes by paying a “make-whole” premium prior to May 15, 2018, and on or
after May 15, 2018 and thereafter at specified redemption prices. Chemours may redeem some or all of the 2025 Notes on or after
May 15, 2020 at specified redemption prices. Chemours may also redeem some or all of the 2023 Notes and Euro Notes by means
other than a redemption, including tender offer and open market repurchases.
Term Loans and Notes Repayments
During the year ended December 31, 2016, the Company repurchased or repaid portions of
its senior secured term loans (“Term
Loans”), 2023 Notes and Euro Notes with aggregate principal and cash payment amounts as follows:
Term Loans(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2023 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Euro Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31, 2016
Aggregate
Principal
Cash
Payment
$
105
192
73
$
370
$
104
182
68
354
(1) The Term Loans aggregate principal amounts exclude the required quarterly installment repayments equivalent to $15 per year.
For the year ended December 31, 2016, we recorded in “Interest expense, net” of the Consolidated Statements of Operations a net
gain on extinguishment of debt of $10, net of approximately $5 charges related to the write-off of deferred financing costs associated
Chemours has required quarterly principal payments related to the Term Loan Facility equivalent to 1.00% per annum through
March 2022, with the balance due at maturity. Term Loan principal maturities over the next five years are $15 in each year from 2017 to
2021. Debt maturities related to the Term Loan Facility and the Notes in 2022 and beyond will be $3,513.
In addition, following the end of each fiscal year commencing on the year ended December 31, 2016, the Company is also required to
make additional principal repayments, depending on leverage levels as defined in the credit agreement, equivalent to up to 50% of
excess cash flow based on certain leverage targets with stepdowns to 25% and 0% as actual leverage decreases to below 3.00 to 1.00
with the extinguished debt.
Maturities
leverage target.
Debt Fair Value
The fair values of
the Term Loan Facility, the 2023 notes, the 2025 notes and the 2023 Euro notes at December 31, 2016 were
approximately $1,370, $1,149, $739 and $305, respectively. The estimated fair values of the Term Loan Facility and the Notes are
based on quotes received from third party brokers, and are classified as Level 2 in the fair value hierarchy.
Note 20. Commitments and Contingent Liabilities
Guarantees
(a) Obligations for Equity Affiliates and Others
Chemours has directly guaranteed various obligations of customers, suppliers and other third parties. At December 31, 2016 and
December 31, 2015, Chemours had directly guaranteed less than $1 and $8 of such obligations, respectively. These represent the
maximum potential amount of future (undiscounted) payments that Chemours could be required to make under the guarantees in the
event of default by the guaranteed parties. No amounts were accrued at December 31, 2016 and 2015.
Chemours assesses the payment and performance risk by assigning default rates based on the duration of
the guarantees. These
default rates are assigned based on the external credit rating of the counterparty or through internal credit analysis and historical default
•
•
•
•
•
•
•
•
•
•
•
incurring additional indebtedness and guaranteeing indebtedness;
paying dividends or making other distributions in respect of, or repurchasing or redeeming, our capital stock;
making acquisitions or other investments;
prepaying, redeeming or repurchasing certain indebtedness;
selling or otherwise disposing of assets;
selling stock of our subsidiaries;
incurring liens;
entering into transactions with affiliates;
entering into agreements restricting our subsidiaries’ ability to pay dividends;
entering into transactions that result in a change of control of us; and
consolidating, merging or selling all or substantially all of our assets.
Our failure to comply with those covenants could result in an event of default that, if not cured or waived, could result in the acceleration
of some or all of our indebtedness, which could lead us to bankruptcy, reorganization or insolvency.
Risks Related to the Separation
We may be unable to achieve some or all of the benefits that we expected to achieve from our separation from DuPont.
As an independent, publicly-traded company, we continue to, among other things, focus our financial and operational resources on our
specific business, growth profile and strategic priorities, design and implement corporate strategies and policies targeted to our
operational focus and strategic priorities, guide our processes and infrastructure to focus on our core strengths, implement and maintain
a capital structure designed to meet our specific needs and more effectively respond to industry dynamics, all of which are benefits we
expected to achieve from our separation. However, we may be unable to fully achieve some or all of these benefits. For example, in
order to position ourselves for the separation and distribution, we undertook a series of strategic, structural and process realignment
and restructuring actions within our operations. These actions may not provide the benefits we expected, and could lead to disruption of
our operations, loss of, or inability to recruit, key personnel needed to operate and grow our businesses following the separation and
distribution, weakening of our internal standards, controls or procedures and impairment of our key customer and supplier relationships.
If we fail to achieve some or all of the benefits that we expected to achieve as an independent company, or do not achieve them in the
time we expected, our business, financial condition and results of operations could be materially and adversely affected.
If the distribution, together with certain related transactions, were to fail to qualify for non-recognition treatment for U.S.
federal income tax purposes, then we could be subject to significant tax and indemnification liability and stockholders
receiving our common stock in the distribution could be subject to significant tax liability.
DuPont received a ruling from the IRS substantially to the effect that, among other things, the distribution qualified as a tax-free
the
transaction under Section 355 and Section 368(a)(1)(D) of
distribution was conditioned on the continued validity of the IRS Ruling, as well as on receipt of a tax opinion, in form and substance
acceptable to DuPont, substantially to the effect that, among other things, the distribution would qualify as a tax-free transaction under
Section 355 and Section 368(a)(1)(D) of the Code, and certain transactions related to the transfer of assets and liabilities to us in
connection with the separation and distribution would not result
in the recognition of any gain or loss to DuPont, us or our
stockholders. The IRS Ruling and the tax opinion relied on certain facts, assumptions, and undertakings, and certain representations
from DuPont and us, regarding the past and future conduct of both respective businesses and other matters, and the tax opinion relies
on the IRS Ruling. Notwithstanding the IRS Ruling and the tax opinion, the IRS could determine that the distribution or such related
these facts, assumptions, representations, or
transactions should be treated as a taxable transaction if
the Internal Revenue Code (the Code). The tax-free nature of
it determines that any of
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The Chemours Company
undertakings were not correct, or that the distribution should be taxable for other reasons, including if the IRS were to disagree with the
conclusions in the tax opinion that are not covered by the IRS Ruling.
If the distribution ultimately was determined to be taxable, then a stockholder of DuPont that received shares of our common stock in
the distribution would be treated as having received a distribution of property in an amount equal to the fair market value of such shares
on the distribution date and could incur significant income tax liabilities. Such distribution would be taxable to such stockholder as a
dividend to the extent of DuPont’s current and accumulated earnings and profits. Any amount that exceeded DuPont’s earnings and
profits would be treated first as a non-taxable return of capital to the extent of such stockholder’s tax basis in its shares of DuPont stock
with any remaining amount being taxed as a capital gain. DuPont would recognize a taxable gain in an amount equal to the excess, if
any, of the fair market value of the shares of our common stock held by DuPont on the distribution date over DuPont’s tax basis in such
shares. In addition, if certain related transactions fail to qualify for tax-free treatment under U.S. federal, state and/or local tax law and/or
foreign tax law, we and DuPont could incur significant tax liabilities under U.S. federal, state, local and/or foreign tax law.
Generally, taxes resulting from the failure of the separation and distribution or certain related transactions to qualify for non-recognition
treatment under U.S. federal, state and/or local tax law and/or foreign tax law would be imposed on DuPont or DuPont’s stockholders
and, under the tax matters agreement that we entered into with DuPont prior to the spin-off, DuPont is generally obligated to indemnify
us against such taxes to the extent that we may be jointly, severally or secondarily liable for such taxes. However, under the terms of the
tax matters agreement, we are also generally responsible for any taxes imposed on DuPont that arise from the failure of the distribution
to qualify as tax-free for U.S. federal income tax purposes within the meaning of Section 355 of the Code or the failure of such related
transactions to qualify for tax-free treatment, to the extent such failure to qualify is attributable to actions, events or transactions relating
to our, or our affiliates’, stock, assets or business, or any breach of our or our affiliates’ representations, covenants or obligations under
the tax matters agreement (or any other agreement we enter into in connection with the separation and distribution), the materials
submitted to the IRS or other governmental authorities in connection with the request for the IRS Ruling or other tax rulings or the
representation letter provided to counsel in connection with the tax opinion. Events triggering an indemnification obligation under the
agreement include events occurring after the distribution that cause DuPont to recognize a gain under Section 355(e) of the Code. Such
tax amounts could be significant. To the extent we are responsible for any liability under the tax matters agreement, there could be a
material adverse impact on our business, financial condition, results of operations and cash flows in future reporting periods.
We are subject to continuing contingent tax-related liabilities of DuPont.
There are several significant areas where the liabilities of DuPont may become our obligations. For example, under the Code and the
related rules and regulations, each corporation that was a member of DuPont’s consolidated tax reporting group during any taxable
period or portion of any taxable period ending on or before the effective time of the distribution is jointly and severally liable for the U.S.
federal income tax liability of the entire consolidated tax reporting group for such taxable period. In connection with the separation and
distribution, we entered into a tax matters agreement with DuPont that allocates the responsibility for prior period taxes of DuPont’s
consolidated tax reporting group between us and DuPont. If DuPont were unable to pay any prior period taxes for which it is
responsible, however, we could be required to pay the entire amount of such taxes, and such amounts could be significant. Other
provisions of federal, state, local, or foreign law may establish similar liability for other matters, including laws governing tax-qualified
pension plans, as well as other contingent liabilities.
We agreed to numerous restrictions to preserve the tax-free treatment of the transactions in the U.S., which may reduce our
strategic and operating flexibility.
Our ability to engage in significant equity transactions could be limited or restricted in order to preserve, for U.S. federal income tax
purposes, the tax-free nature of the distribution by DuPont. Even if the distribution otherwise qualifies for tax-free treatment under
Section 355 of the Code, the distribution may result in corporate-level taxable gain to DuPont under Sections 355(e) and 368(a)(1)(D) of
the Code if 50 percent or more, by vote or value, of shares of our stock or DuPont’s stock are acquired or issued as part of a plan or
series of related transactions that includes the distribution. The process for determining whether an acquisition or issuance triggering
these provisions has occurred is complex, inherently factual and subject to interpretation of the facts and circumstances of a particular
case. Any acquisitions or issuances of our stock or DuPont’s stock within a two-year period after the distribution generally are presumed
to be part of such a plan, although we or DuPont, as applicable, may be able to rebut that presumption. Accordingly, under the tax
matters agreement entered into prior to the spin-off, for the two-year period following the distribution, we are prohibited, except in certain
circumstances, from:
•
entering into any transaction resulting in the acquisition of 40 percent or more of our stock or substantially all of our assets,
whether by merger or otherwise;
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
In December 2016, Chemours entered into a third amendment to the credit agreement to change certain covenants and allow the
Company to enter into a sale and leaseback transaction for the sale of its corporate headquarters building located in Wilmington,
Delaware. The amendment requires the Company to use the proceeds from sale to repay portion of the term loans. These transactions
are expected to be completed in the first quarter of 2017, and the Company expects to receive approximately $32 proceeds, subject to
customary closing adjustments.
Fees and expenses incurred in connection with the amendments were approximately $3 and $1 for the years ended December 31, 2016
and 2015, respectively, which were primarily capitalized in “Other assets” of the Consolidated Balance Sheets and will be amortized to
interest expense on a straight-line basis over the remaining term of the Revolving Credit Facility.
The credit agreement, as amended, contains financial covenants which, solely with respect to the Revolving Credit Facility, require
Chemours not to exceed a maximum senior secured net leverage ratio of 3.50 to 1.00 each quarter through December 31, 2016, 3.00
to 1.00 through June 30, 2017 and further decreasing by 0.25 to 1.00 every subsequent six months to 2.00 to 1.00 by January 1, 2019
and thereafter. Chemours is also required to maintain a minimum interest coverage ratio of 1.75 to 1.00 each quarter through June 30,
2017 and further increasing by 0.25 to 1.00 every subsequent six months to 3.00 to 1.00 by January 1, 2019 and thereafter. In addition,
the credit agreement contains customary affirmative and negative covenants that, among other things, limit or restrict Chemours and its
subsidiaries’ ability, subject to certain exceptions, to incur liens, merge, consolidate or sell, transfer or lease assets, make investments,
pay dividends, transact with subsidiaries and incur indebtedness. The credit agreement also contains customary representations and
warranties and events of default. Chemours was in compliance with its debt covenants as of December 31, 2016.
Chemours’ obligations under the senior secured credit facilities are guaranteed on a senior secured basis by all of its material domestic
subsidiaries, subject to certain agreed upon exceptions. The obligations under the senior secured credit facilities are also, subject to
certain agreed upon exceptions, secured by a first priority lien on substantially all of Chemours and its material wholly-owned domestic
subsidiaries’ assets, including 100% of the stock of domestic subsidiaries and 65% of the stock of certain foreign subsidiaries.
Senior Unsecured Notes
On May 12, 2015, Chemours issued senior unsecured notes (the “Notes”) with an aggregate principal of approximately $2,503 in a
private placement, which comprise of $1,350 aggregate principal amount issued at an interest rate of 6.625% per annum and will
mature on May 15, 2023 (the “2023 Notes”), $750 aggregate principal amount issued at an interest rate of 7.000% per annum and will
mature on May 15, 2025 (the “2025 Notes”) and €360 aggregate principal amount issued at an interest rate of 6.125% and will mature
on May 15, 2023 (the “Euro Notes”). The Notes require payment of principal at maturity and interest semi-annually in cash and in
arrears on May 15 and November 15 of each year.
The proceeds from the Notes were used to fund the cash and in-kind distributions to DuPont and to pay related fees and expenses. The
in-kind distribution to DuPont of $507 aggregate principal amount of Chemours 2025 Notes were exchanged by DuPont with third
parties for certain DuPont notes.
In connection with the issuance of the Notes, Chemours entered into a registration rights agreement, in which Chemours agreed to file
with the SEC, a registration statement for the exchange of the Notes for new registered notes with identical terms. On March 18, 2016,
Chemours filed a registration statement on Form S-4 with respect to the exchange offer. The registration statement was declared
effective on April 12, 2016, and the exchange offer was completed on May 19, 2016. In addition, on May 5, 2016, the Euro Notes were
listed for trading on the Global Exchange Market of the Irish Stock Exchange.
Each series of Notes is or will be fully and unconditionally guaranteed, jointly and severally, by Chemours’ existing and future
domestic subsidiaries that guarantee (the Guarantors) the Senior Secured Credit Facilities or that guarantee other indebtedness of
Chemours or any guarantor in an aggregate principal amount in excess of $75 (the Guarantees). The Notes are unsecured and
unsubordinated obligations of Chemours. The Guarantees are unsecured and unsubordinated obligations of the Guarantors. The Notes
rank equally in right of payment to all of Chemours’ existing and future unsecured unsubordinated debt and senior in right of payment
to all of Chemours’ existing and future debt that is by its terms expressly subordinated in right of payment to the Notes. The Notes are
subordinated to indebtedness under the Senior Secured Credit Facilities as well as any future secured debt to the extent of the value of
the assets securing such debt. Chemours’ is obligated to offer to purchase the Notes at a price of (a) 101 percent of their principal
amount, together with accrued and unpaid interest, if any, to the date of purchase, upon the occurrence of certain change of control
events and (b) 100 percent of their principal amount, together with accrued and unpaid interest, if any, to the date of purchase, with the
proceeds from certain asset dispositions. These restrictions and prohibitions are subject to certain qualifications and exceptions set
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Note 19. Debt
Long-term debt was comprised of the following at December 31, 2016 and 2015:
3
33
Long-term debt:
Senior secured term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,372
$
1,493
December 31,
December 31,
2016
2015
Senior unsecured notes:
6.625%, due May 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.00%, due May 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.125%, due May 2023 (€295 at December 31, 2016; €360 at December 31, 2015)
Other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Unamortized issue discount on senior secured term loan . . . . . . . . . . . . . . .
Less: Unamortized debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Short-term borrowings and current maturities . . . . . . . . . . . . . . . . . . . . . . .
1,158
750
308
3
3,591
5
42
15
1,350
750
395
26
4,014
7
53
39
Long-term debt, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
3,529
$
3,915
Senior Secured Credit Facilities
On May 12, 2015, Chemours entered into a credit agreement that provides for a seven-year senior secured term loan (the Term Loan
Facility) in a principal amount of $1,500 repayable in equal quarterly installments at a rate of one percent of the original principal
amount per year, with the balance payable on the final maturity date. The Term Loan Facility was issued with a $7 original
issue
discount and bears interest at a rate of LIBOR plus 3.00%, with a 0.75% LIBOR floor. The proceeds from the Term Loan Facility were
used to fund a portion of the distribution to DuPont, along with related fees and expenses.
The credit agreement also provided for a five-year senior secured revolving credit facility (the Revolving Credit Facility), which has been
reduced to $750 as part of the amendment completed on February 19, 2016 (discussed below). The proceeds of any loans made
under the Revolving Credit Facility can be used for capital expenditures, acquisitions, working capital needs and other general corporate
purposes. No borrowings were outstanding under our Revolving Credit Facility but had $132 and $129 in letters of credit issued and
outstanding under this facility at December 31, 2016 and 2015, respectively. The Revolving Credit Facility bears variable interest of a
range based on our total net leverage ratio between (a) 0.50% and 1.25% for base rate loans and (b) 1.50% and 2.25% for LIBOR
loans. The applicable margins were 1.00% for base rate loans and 2.00% for LIBOR loans as of December 31, 2016 and 1.25% for
base rate loans and 2.25% for LIBOR loans as of December 31, 2015. In addition, we are required to pay a commitment fee on the
As of December 31, 2016 and 2015, commitment fees were assessed at a rate of 0.30% and 0.35%, respectively.
In September 2015, in connection with the Company’s transformation plan announced in August 2015, Chemours and its Revolving
Credit Facility lenders entered into an amendment to the Revolving Credit Facility that modified the consolidated EBITDA definition in
the covenant calculation to include pro forma benefits from future cost savings initiatives in the calculation of financial covenants that
rely on consolidated EBITDA beginning from the quarter ended September 30, 2015. Since the revolver availability in any quarter is
determined by the cushion remaining in the financial maintenance covenants at the end of
the previous quarter, this amendment
increased the Company’s access to the revolving credit facility.
In February 2016, Chemours and its Revolving Credit Facility lenders entered into a second amendment to the Revolving Credit Facility
that (a) replaced the total net leverage ratio financial covenant with senior secured net leverage ratio; (b) reduced the minimum required
levels of interest expense coverage ratio covenant; (c) increased the limits and extended the time horizon for inclusion of pro forma
benefits of announced cost reduction initiatives into consolidated EBITDA definition for the purposes of calculating financial
maintenance covenants; and (d) reduced the revolver availability from $1,000 to $750. As a result of this amendment, the Company
recorded a charge of approximately $4 to write off a proportionate amount of unamortized debt issuance costs attributable to the
reduction in revolver commitment, which was included in “Interest expense, net”.
The Chemours Company
•
•
•
•
merging, consolidating or liquidating;
issuing equity securities beyond certain thresholds;
repurchasing our capital stock; or
ceasing to actively conduct our business.
These restrictions may limit our ability to pursue certain strategic transactions or other transactions, including our transformation plans
that we may believe to otherwise be in our best interests or that might increase the value of our business. In addition, under the tax
matters agreement, we are required to indemnify DuPont against any such tax liabilities as a result of the acquisition of our stock or
assets, even if we do not participate in or otherwise facilitate the acquisition.
Risks Related to Our Common Stock
Our stock price could become more volatile and investments could lose value.
The market price of our common stock and the number of shares traded each day has experienced significant fluctuations since our
separation from DuPont and may continue to fluctuate significantly. The market price for our common stock may be affected by a
number of factors, including, but not limited to:
•
•
•
•
•
•
•
•
•
•
•
our quarterly or annual earnings, or those of other companies in our industry;
actual or anticipated fluctuations in our operating results;
changes in earnings estimates by securities analysts or our ability to meet those estimates or our earnings guidance;
anticipated or actual outcomes or resolutions of legal or other contingencies;
the operating and stock price performance of other comparable companies;
credit rating agency actions;
a change in our dividend or stock repurchase activities;
changes in rules or regulations applicable to our business;
the announcement of new products by us or our competitors;
overall market fluctuations and domestic and worldwide economic conditions; and
other factors described in these “Risk Factors” and elsewhere in this Form 10-K.
A significant drop or rise in our stock price could expose us to costly and time-consuming litigation, which could result in substantial
costs and divert management’s attention and resources, resulting in an adverse effect on our business.
average daily unused amount of the Revolving Credit Facility at a rate based on our total net leverage ratio, between 0.20% and 0.35%.
We cannot guarantee the timing, amount, or payment of dividends on our common stock in the future.
The declaration, payment and amount of any dividend are subject to the sole discretion of our board of directors and, in the context of
our financial policy, will depend upon many factors, including our financial condition and prospects, our capital requirements and access
to capital markets, covenants associated with certain of our debt obligations, legal requirements and other factors that our board of
directors may deem relevant, and there can be no assurances that we will continue to pay a dividend in the future.
A stockholder’s percentage of ownership in us may be diluted in the future.
A stockholder’s percentage ownership in us may be diluted because of equity issuances for acquisitions, capital market transactions or
otherwise, including, without limitation, equity awards that we may be granting to our directors, officers and employees. Such issuances
may have a dilutive effect on our earnings per share, which could adversely affect the market price of our common stock.
In addition, our amended and restated certificate of incorporation authorizes us to issue, without the approval of our stockholders, one
or more classes or series of preferred stock having such designation, powers, preferences and relative, participating, optional and other
special rights, including preferences over our common stock with respect to dividends and distributions, as our board of directors
generally may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the
value of our common stock. For example, we could grant the holders of preferred stock the right to elect some number of our directors
in all events or on the happening of specified events or to veto specified transactions. Similarly, the repurchase or redemption rights or
liquidation preferences we could assign to holders of preferred stock could affect the residual value of our common stock.
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Certain provisions in our amended and restated certificate of incorporation and amended and restated by-laws, and of
Delaware law, may prevent or delay an acquisition of us, which could decrease the trading price of the common stock.
The Chemours Company
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Our amended and restated certificate of
incorporation and amended and restated by-laws contain, and Delaware law contains,
provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids
unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with our board of directors rather than to
attempt a hostile takeover. These provisions include, among others:
represent direct financing leases, whereby Chemours was the lessor of
this equipment. Lease receivables were recorded, which
represent the balance of the minimum future lease payments. The current portion of lease receivables was previously included in
accounts and notes receivable — trade, net, as shown in Note 11 and the long-term portion was previously included in other assets, as
shown above. These lease receivables were included in the sale of the Sulfur business that was completed in August 2016 (see Note
•
•
•
•
•
•
the inability of our stockholders to act by written consent;
the limited ability of our stockholders to call a special meeting;
rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings;
the right of our board of directors to issue preferred stock without stockholder approval;
Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VAT and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
the ability of our directors, and not stockholders, to fill vacancies (including those resulting from an enlargement of the board
of directors) on our board of directors; and
Note 17. Other Accrued Liabilities
the requirement that stockholders holding at least 80 percent of our voting stock are required to amend certain provisions in
our amended and restated certificate of incorporation and our amended and restated by-laws.
December 31,
December 31,
2016
2015
7).
Note 16. Accounts Payable
December 31,
December 31,
2016
2015
3
33
In addition, we are subject to Section 203 of the Delaware General Corporations Law (the DGCL). Section 203 provides that, subject to
limited exceptions, persons that (without prior board approval) acquire, or are affiliated with a person that acquires, more than 15
percent of the outstanding voting stock of a Delaware corporation shall not engage in any business combination with that corporation,
including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or
its affiliate becomes the holder of more than 15 percent of the corporation’s outstanding voting stock.
We believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential
acquirers to negotiate with our board of directors and by providing our board of directors with more time to assess any acquisition
proposal. These provisions are not intended to make us immune from takeovers. However, these provisions will apply even if an
acquisition proposal or offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our
board of directors determines is not in our best interests and our stockholders’. These provisions may also prevent or discourage
attempts to remove and replace incumbent directors.
Several of the agreements that we have entered into with DuPont require DuPont’s consent to any assignment by us of our rights and
obligations, or a change of control of us, under the agreements. The consent rights set forth in these agreements might discourage,
delay or prevent a change of control that a stockholder may consider favorable.
In addition, an acquisition or further issuance of our stock could trigger the application of Section 355(e) of the Code. Under the tax
matters agreement executed prior to the spin-off, we would be required to indemnify DuPont for the tax imposed under Section 355(e) of
the Code resulting from an acquisition or issuance of its stock, even if it did not participate in or otherwise facilitate the acquisition, and
this indemnity obligation might discourage, delay or prevent a change of control that a stockholder may consider favorable. Please see
the risk factor “If the distribution, together with certain related transactions, were to fail to qualify for non-recognition treatment for U.S.
federal income tax purposes, then we could be subject to significant tax and indemnification liability and stockholders receiving our
common stock in the distribution could be subject to significant tax liability.” for further information.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
28
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$
$
$
858
26
884
154
31
342
71
39
53
76
21
85
945
28
973
109
76
11
68
32
53
20
21
64
223
108
23
58
41
11
89
553
Compensation and other employee-related costs . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Employee separation costs(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued litigation(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Environmental remediation(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer rebates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miscellaneous(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
872
$
454
(1) See Note 6 for further information.
(2) Accrued litigation includes $335 litigation accrual related to the PFOA MDL Settlement. See Note 20 for further discussion of
accrued litigation and environmental remediation.
(3) Deferred revenue includes $58 prepayment by DuPont for specified goods and services, which Chemours expects to provide
(4) Miscellaneous primarily includes accrued utility expenses, property taxes, an accrued indemnification liability, asset retirement
obligations (see Note 20) and other miscellaneous expenses.
through mid-2017.
Note 18. Other Liabilities
December 31,
December 31,
2016
2015
Environmental remediation(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Employee-related costs(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee separation costs(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued litigation(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset retirement obligations(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miscellaneous(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
208
113
3
53
41
5
101
524
$
$
(1) See Note 20 for further details on environmental remediation, asset retirement obligations and accrued litigation.
(2) See Note 22 for further details on long-term employee benefits.
(3) See Note 6 for further information.
(4) Miscellaneous primarily includes an accrued indemnification liability.
] 32 Page
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Item 2. PROPERTIES
The Chemours Company
assumptions used by management related to the evaluation may change or that actual results may vary significantly from
Chemours Production Facilities and Technical Centers
Our corporate headquarters is in Wilmington, Delaware, and we maintain a global network of production facilities and technical centers
located in cost-effective and strategic locations. We also use contract manufacturing and joint venture partners in order to provide
regional access or to lower manufacturing costs, as appropriate. The following chart lists our production facilities as of December 31,
2016:
Production Facilities
(1) Represents non-cash favorable supply contracts acquired in connection with the sale of Sulfur business and recognized during the
third quarter of 2016 based on the present value of the difference between their contractual cash flows and estimated cash flows
had the contracts been executed at a determinable market price. These contract intangibles will be amortized to cost of goods sold
over the remaining life of the supply contracts through 2021.
Europe, Middle East & Africa
(EMEA)
The aggregate pre-tax amortization expense for definite-lived intangible assets was $3, $3 and $3 for the years ended December 31,
2016, 2015 and 2014, respectively. The estimated aggregate pretax amortization expense for 2017, 2018, 2019, 2020 and 2021 is $4,
$3, $3, $3 and $1, respectively. Definite-lived intangible assets are amortized over their estimated useful lives, generally for periods
ranging from 5 to 20 years. The reasonableness of the useful lives of these assets is continually evaluated. There are no indefinite-lived
Latin America
Asia Pacific
North America
Titanium Technologies
DeLisle, MS
New Johnsonville, TN
Starke, FL (Mine)
Chemical Solutions
Pascagoula, MS
Memphis, TN
Shared
Locations
Belle, WV(3)
Fluoroproducts
El Dorado, AR(1)
Elkton, MD(1)
Louisville, KY
Fayetteville, NC
Deepwater, NJ
Corpus Christi, TX
LaPorte, TX(2)
Washington, WV
Maitland, Canada
Mechelen, Belgium
Villers St. Paul, France(1)
Dordrecht, Netherlands
Altamira, Mexico
Barra Mansa, Brazil(2)
Kuan Yin, Taiwan
Changshu, China
Shanghai, China(4)
SiChuan, China(4)
Chiba, Japan(4)
Shimizu, Japan(4)
(1) Site is leased from third party.
(2) Site is leased from DuPont.
(3) Shared facility between the Chemical Solutions and Fluoroproducts segments.
(4) Sites with joint venture equity affiliates.
We have technical centers and R&D facilities located at a number of our production facilities. We also maintain standalone technical
centers to serve our customers and provide technical support. The following chart lists our standalone technical centers as of
December 31, 2016:
Region
North America
EMEA
Latin America
Asia Pacific
Technical Centers
Titanium Technologies
Fluoroproducts
Akron, OH(2)
Kallo, Belgium(1)
Mechelen, Belgium(1)
Meyrin, Switzerland(2)
Barra Mansa, Brazil(2)
Mexico City, Mexico(1)
Chemical Solutions Shared Locations
Wilmington, DE (All
Segments)(2)(3)
Utsonomyia, Japan(2)
Shanghai, China(2)
(All Segments)
Direct Financing Leases
Prior to the sale of the Sulfur business, Chemours had constructed fixed assets on land that it leased from third parties at two of its
(1) Leased from third party.
(2) Leased from DuPont.
facilities in the U.S. (Borderland and Morses Mill). Management has analyzed these arrangements and determined these assets
(3) There are two facilities at this location.
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management’s estimates.
intangible assets by major class:
Intangible Assets, Net: The following table summarizes the gross carrying amounts and accumulated amortization of other
3
Customer lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased and licensed technology . . . . . . . . . . . . . . . . . . . .
Other(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
19
5
3
10
December 31, 2016
December 31, 2015
Cost
Accumulated
Amortization
Net
$
2
1
3
1
10
(7)
(18)
(2)
(2)
—
Accumulated
Amortization
Net
$
Cost
$ 10
19
$
(8)
(17)
(2)
(6)
(2)
2
2
3
2
1
5
8
3
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 46
$
(29)
$ 17
$ 45
$
(35)
$
10
intangible assets.
Note 15. Other Assets
Leases receivable – non-current(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $
Capitalized repair and maintenance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension assets(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances and deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miscellaneous(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
145
159
—
41
29
43
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
417
$
125
149
138
11
47
—
38
508
December 31,
December 31,
2016
2015
(1) Relates to Sulfur business which was included in the assets disposed in 2016. See Direct Financing Leases below.
(2) Pension assets represent the funded status of certain of the Company’s long-term employee benefit plans.
(3) Miscellaneous includes deferred financing fees related to the Revolving Credit Facility of $13 and $19 as of December 31, 2016
and 2015, respectively.
Asset Held for Sale
In December 2016, the Company’s corporate headquarters building located in Wilmington, Delaware, was classified as held for sale in
connection with a sale agreement entered into in January 2017. The transaction is expected to be completed in the first quarter of
2017, and the Company expects to receive approximately $32 proceeds, subject to customary closing adjustments. As a result, the
Company recorded approximately $13 pre-tax impairment charge for the year ended December 31, 2016. The Company intends to
lease a portion of the building subject to the completion of the sale.
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The Chemours Company
Chemours’ plants and equipment are maintained and in good operating condition. Chemours believes it has sufficient production
capacity for its primary products to meet demand in 2017. Properties are primarily owned by Chemours; however, certain properties are
leased, as noted in the preceding tables.
its operations are critical to its employees, community, and to the future of
Chemours recognizes that the security and safety of
Chemours. Physical security measures have been combined with process safety measures, administrative procedures and emergency
response preparedness into an integrated security plan. Prior to the separation, DuPont conducted vulnerability assessments at
operating facilities in the U.S. and high priority sites worldwide and identified and implemented appropriate measures to protect these
facilities from physical and cyber-attacks. Chemours intends to conduct similar vulnerability assessments periodically in the future.
Chemours is partnering with carriers, including railroad, shipping and trucking companies, to secure chemicals in transit.
Item 3. LEGAL PROCEEDINGS
Legal Proceedings
The Company is subject to various legal proceedings, including, but not limited to, product liability, patent infringement, antitrust claims
and claims for property damage or personal injury. Information regarding certain of these matters is set forth below and in Note 20 to
the Consolidated Financial Statements.
Litigation
PFOA: Environmental and Litigation Proceedings
For purposes of this report, the term PFOA means collectively perfluorooctanoic acid and its salts, including the ammonium salt and
does not distinguish between the two forms. Information related to this and other litigation matters is included in Note 20 to the
Consolidated Financial Statements.
Environmental Proceedings
LaPorte Plant, LaPorte, Texas
The U.S. Environmental Protection Agency (EPA) conducted a multimedia inspection at the DuPont LaPorte facility in January 2008.
DuPont, the EPA and the Department of Justice (DOJ) began discussions in the fall of 2011 relating to the management of certain
materials in the facility’s waste water treatment system, hazardous waste management, flare and air emissions. These negotiations
continue. Chemours operates a fluoroproducts production facility at this site.
Dordrecht, Netherlands
The Company has received requests from the Labor Inspectorate (ISZW), the local environmental agency (OZHZ) and the National
Institute for Public Health and the Environment (RIVM) in the Netherlands for information and documents regarding the Dordrecht site’s
operations. The Company has complied with the requests. We understand that some of
the requests from OZHZ are part of a
preliminary investigation initiated by a public prosecutor, although we have not received notice that it intends to pursue such action.
Item 4. MINE SAFETY DISCLOSURES
Information regarding mine safety and other regulatory actions at the Company’s surface mine in Starke, Florida is included in Exhibit
95 to this report.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list of the executive officers and a summary of their professional experience:
Mark P. Vergnano, age 59, serves as our President and Chief Executive Officer. Prior to joining Chemours, he held roles of
increasing responsibility at E. I. du Pont de Nemours and Company. In October 2009, Mr. Vergnano was appointed Executive Vice
President of DuPont and was responsible for multiple businesses and functions, including the businesses in the Chemours segment:
DuPont Chemicals & Fluoroproducts and Titanium Technologies. In June 2006, he was named Group Vice President of DuPont
Safety & Protection. In October 2005, he was named Vice President and General Manager — Surfaces and Building Innovations. In
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Note 14. Goodwill and Other Intangible Assets, Net
Goodwill: The following table summarizes changes in the carrying amount of goodwill by reportable segment:
Titanium
Technologies
Fluoroproducts
Balance as of December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation and other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Sale of business(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation and other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
13
—
—
13
—
—
13
$
$
$
Chemical
Solutions
Total
$
100
$
85
—
—
85
—
—
85
$
$
68
$
(25)
(7)
(13)
—
55
$
198
(25)
(7)
166
(13)
—
153
3
(1) Represents goodwill disposed in connection with the sale of the C&D business (See Note 7).
Accumulated impairment losses as of December 31, 2016, 2015 and 2014 included in goodwill are $25, $25 and $0, respectively.
The Company has three operating segments: Titanium Technologies, Fluoroproducts and Chemical Solutions (see Note 24). The
Company defines its reporting units as one level below the operating segments except for Titanium Technologies, which is an operating
segment and a reporting unit. The Company tested the goodwill attributable for each of reporting units within the operating segments
for impairment as of October 1, 2016 and concluded that the estimated fair value of each reporting unit, for which goodwill is recorded,
substantially exceeded the reporting unit’s carrying value, indicating that none of the Company’s goodwill was impaired.
In October 2016, the Fluoroproducts segment leader announced a new organizational structure change to better manage the business
and drive accountability. The change in the organizational structure also changed the reporting units of Fluoroproducts segment to
Fluorochemicals and Fluoropolymers effective November 1, 2016. Prior to this change, the Fluoroproducts segment’s reporting units
were Fluorochemicals, Industrial Resins and Diversified Technologies, which were tested for annual impairment as of October 1, 2016.
The reporting unit change did not result in any impairment based on a separate impairment evaluation performed at the effective date of
the change, as estimated fair value of the new reporting unit substantially exceeded its carrying value.
In 2015, in connection with the strategic evaluation of the Chemical Solutions portfolio and the resulting changes to the reporting units
in the third quarter of 2015, the Chemical Solutions segments recorded a $25 pre-tax impairment charge related to its Sulfur reporting
unit. Sulfur reporting unit was disposed through the sale of its assets and business during 2016 (see Note 7).
The Company evaluates goodwill for impairment using a two-step process. The first step is utilizing a discounted cash flow methodology
to calculate the fair value of its reporting units; and where market comparables are available, the Company considers EBITDA multiples
as part of the reporting unit valuation analysis. Key assumptions used in the discounted cash flows include projected growth rates,
discount rates, tax rates and terminal values. Factors considered in developing cash flows and EBITDA projections include: 1)
macroeconomic conditions; 2) industry and market considerations; 3) costs of raw materials and labor or other costs; 4) overall financial
performance; and 5) other relevant entity-specific events. The discount rate used represents the weighted average cost of capital for the
reporting units considering the risks and uncertainty inherent in the cash flows of the reporting units and in the internally developed
forecasts. The second step of the quantitative test is required if the first step of the quantitative test indicates a potential impairment.
The second step is performed by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of its goodwill.
If the carrying amount of goodwill is greater than its implied fair value, an impairment loss is recorded. The use of these unobservable
inputs results in the fair value estimate being classified as a Level 3 asset measured at fair value on a nonrecurring basis subsequent to
its original recognition.
The determination of whether or not goodwill is impaired involves a significant level of judgment in the assumptions underlying the
approaches’ used to determine the estimated fair value of our reporting units. Chemours believes that assumptions and rates used in
the impairment assessment are reasonable. However, these assumptions are judgmental and variations in any assumptions could result
in materially different calculations of fair value. The Company will continue to evaluate goodwill on an annual basis as of October 1,
and whenever events or changes in circumstances, such as significant adverse changes in operating results, market conditions or
changes in management’s business strategy, indicate that there may be a probable indicator of impairment. It is possible that the
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Note 13. Property, Plant and Equipment
Chemours’ property, plant and equipment consisted of:
December 31,
2016
2015
Equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
6,748
$
7,327
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mineral rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
814
293
106
36
7,997
(5,213)
Net property, plant and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2,784
$
737
804
111
36
9,015
(5,838)
3,177
Depreciation expense amounted to $281, $264 and $254 for the years ended December 31, 2016, 2015 and 2014, respectively.
Property, plant and equipment includes gross assets under capital leases of $5 and $7 at December 31, 2016 and 2015, respectively.
Interest expense capitalized as part of property, plant and equipment was $18 and $21 for the years ended December 31, 2016 and
2015. Chemours did not incur interest in the year ended December 31, 2014.
During the third quarter of 2016, the Company evaluated the carrying value of
its aniline manufacturing facility in Pascagoula,
Mississippi for recoverability given current business plans. The evaluation performed indicated that the carrying amount of this asset
group was not recoverable when compared to the expected undiscounted cash flows. Based on management’s assessment of the fair
value of the asset group, the Company determined that the carrying value of the Pascagoula aniline asset group exceeded its fair value
and as a result, a $48 pre-tax impairment charge was recorded in the Chemical Solutions segment, which represents an impairment of
substantially all of the remaining net book value of the Pascagoula aniline asset group.
During the third quarter of 2015, in connection with the strategic evaluation of the Chemical Solutions portfolio, excluding cyanides, the
Company determined that the carrying value of
the RMS manufacturing facility of
the Chemical Solutions segment may not be
recoverable given the strategic decision to discontinue investment in the business. An impairment evaluation was performed which
indicated that the carrying amount of this asset group in the U.S. was not recoverable when compared to the expected undiscounted
cash flows. Based on management’s assessment of the fair value of the asset group, the Company determined that the carrying value
of that asset group exceeded the fair value and as a result, a $45 pre-tax impairment charge was recorded in the Chemical Solutions
segment, which represents an impairment of substantially all of the remaining net book value of the RMS asset group.
The fair value of the asset groups were determined using an income approach based on the present value of the estimated future cash
flows. The key assumptions used included growth rates and cash flow projections, discount rate, tax rate and an estimated terminal
value. The amount was recorded in “restructuring and asset related charges, net” in the Consolidated Statements of Operations. Refer
to Note 6 for additional information.
The Chemours Company
February 2003, he was named Vice President and General Manager — Nonwovens. Prior to that, he had several assignments in
manufacturing, technology, marketing, sales and business strategy. Mr. Vergnano joined DuPont in 1980 as a process engineer. Mr.
Vergnano has served on the board of directors of the National Safety Council since 2007, the American Chemistry Council since 2015,
and Johnson Controls International plc since 2016. He previously served on the board of directors of Johnson Controls, Inc. from 2011
to 2016.
Mark E. Newman, age 53, serves as our Senior Vice President and Chief Financial Officer. Mr. Newman joined Chemours in
November 2014 from SunCoke Energy where he was SunCoke Energy’s Senior Vice President and Chief Financial Officer and led its
financial, strategy, business development and information technology functions. Mr. Newman joined SunCoke’s leadership team in
March 2011 to help drive SunCoke’s separation from its parent company, Sunoco, Inc. He led SunCoke through an initial public offering
and championed a major restructuring of SunCoke, which resulted in the initial public offering of SunCoke Energy Partners in
January 2013, creating the first coke-manufacturing master limited partnership. Prior to joining SunCoke, Mr. Newman served as Vice
President Remarketing & Managing Director of SmartAuction, Ally Financial Inc. (previously General Motors Acceptance Corporation).
Mr. Newman began his career at General Motors in 1986 as an Industrial Engineer and progressed through several financial and
operational leadership roles within the global automaker, including Vice President and Chief Financial Officer of Shanghai General
Motors Limited; Assistant Treasurer of General Motors Corporation; and North America Vice President and CFO.
E. Bryan Snell, age 60, serves as our President — Titanium Technologies. Mr. Snell was appointed President — Titanium Technologies
in May 2015. Previously, he served as Planning Director — DuPont Performance Chemicals (2014-2015). Prior to that, he held
leadership positions in DuPont Titanium Technologies,
including Planning Director (2011-12 in Wilmington, DE and 2012-13 in
Singapore) and Global Sales and Marketing Director (2008-2010). Mr. Snell served as Regional Operations Director — DuPont
Coatings and Color Technologies Platform in 2007 and 2008. He was posted in Taiwan from 2002 to 2006, in the roles of Plant
Manager — Kuan Yin Plant and Asia/Pacific Regional Director, DuPont Titanium Technologies. Mr. Snell joined DuPont in 1978 as a
process engineer and has experience in nuclear and petrochemical operations, as well as sales, business strategy and M&A.
Paul Kirsch, age 53, serves as our President — Fluoroproducts. Mr. Kirsch joined Chemours in June 2016 from Henkel AG & Company,
where he served as Senior Vice President of supply chain and operations for three years. Prior to that, he was President of
the
automotive, metals, and aerospace division of Henkel AG & Company KGaA. He also served as Co-Chairman of a Henkel-BASF joint
venture. Before joining Henkel in 2009, Mr. Kirsch spent nearly 25 years in various engineering, operations, and business development
roles of increasing responsibility within the automotive and telematics industries. He was Vice President of Hughes Telematics, where
his responsibilities included business development, quality, and strategic planning. He also served as Vice President of XM Satellite
the Washington, DC-based firm. Mr. Kirsch
Radio, where he was responsible for growing and running the automotive business of
started his career at Delphi in 1985, where he worked for nearly 19 years, in both regional and global roles ranging from product
engineer to director of engineering for Asia Pacific to director of mergers and acquisitions, as well as general director of sales,
marketing, and strategic planning.
Christian W. Siemer, age 58, serves as our President — Chemical Solutions. He moved to this role in July 2014. Mr. Siemer joined
DuPont in 2010 as the Managing Director of Clean Technologies, a business unit of DuPont Sustainable Solutions focused on process
technology development and licensing. He led the successful acquisition of MECS Inc., the global
leader in technology for the
production of sulfuric acid. Mr. Siemer began his career in 1980 with Stauffer Chemicals as a process engineer. Following Stauffer’s
acquisition by ICI plc, Mr. Siemer moved through a range of commercial roles and overseas assignments managing portfolios of
international industrial and specialty chemical businesses.
David C. Shelton, age 53, serves as our Senior Vice President, General Counsel and Corporate Secretary. In 2011, Mr. Shelton was
appointed Associate General Counsel, DuPont, and was responsible for the US Commercial team — the business lawyers and
paralegals counseling all the DuPont business units with the exception of Agriculture. Mr. Shelton was the Commercial attorney to a
variety of DuPont businesses including the Performance Materials platform, which he advised on international assignment in Geneva,
and the businesses now comprising the DuPont Chemicals and Fluoroproducts business unit. Prior to that, Mr. Shelton advised the
company on environmental and remediation matters as part of the environmental legal team. Mr. Shelton joined DuPont in 1996, after
seven years in private practice as a litigator in Pennsylvania and New Jersey.
Beth Albright, age 50, serves as our Senior Vice President Human Resources. Mrs. Albright joined DuPont in October 2014 from Day &
Zimmermann, where she held the position of Senior Vice-President Human Resources since May 2011. Prior to her experience at Day
& Zimmermann, Mrs. Albright was the Global Vice President Human Resources for Tekni-Plex, which she joined in July 2009. She
joined Rohm and Haas in 2000 and held various Human Resources supporting global businesses, technology, manufacturing and staff
functions. In 1995 she joined FMC as site Human Resources manager at a manufacturing site and progressed into the corporate office.
Mrs. Albright began her career with Fluor Daniel Construction in their Industrial Relations department in 1989.
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Erich Parker, age 65, serves as our Vice President of Corporate Communications and Chief Brand Officer. Mr. Parker was appointed
Creative Director and Global Director of Corporate Communications of DuPont in 2010. He led the initiative to develop corporate
positioning and its creative expression through branded content and program sponsorship with large international media outlets. In
2008, Mr. Parker was appointed Communications Leader for DuPont’s Safety and Protection Platform. Prior to joining DuPont,
Mr. Parker was principal of his own public relations and marketing communications firm based in Washington, D.C., and New York.
Mr. Parker has also served as Executive Vice President of Association & Issues Management; Director of Communications for the
American Academy of Actuaries; founding publisher and Executive Editor of the magazine Contingencies; and Public Affairs Aide for
Renewable Energy to the Secretary of Energy, U.S. Department of Energy.
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
(2) Diluted earnings (loss) per share is calculated using net income (loss) available to common shareholders divided by diluted
weighted average shares of common shares outstanding during each period, which includes unvested restricted shares. Diluted
earnings per share considers the impact of potentially dilutive securities except in periods in which there is a loss because the
inclusion of the potential common shares would have an antidilutive effect. Chemours had no equity awards outstanding prior to
The following average number of stock options were antidilutive and, therefore, were not included in the diluted earnings per share
the spin-off.
calculation:
Average number of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,820,499
8,358,894
—
Note 11. Accounts and Notes Receivable — Trade, Net
Year Ended December 31,
2016
2015
2014
December 31,
2016
2015
Accounts receivable – trade, net(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
742
$
VAT, GST and other taxes(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leases receivable – current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other receivables(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46
—
19
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
807
$
757
68
13
21
859
(1) Accounts receivable — trade is net of allowances of $5 and $4 as of December 31, 2016 and 2015, respectively. Allowances are
equal to the estimated uncollectible amounts.
(2) Value Added Tax (VAT) and Goods and Services Tax (GST).
(3) Other receivables consist of notes receivable, advances and other deposits.
Accounts and notes receivable are carried at amounts that approximate fair value. Bad debt expense was $7, $1 and $1 for the years
ended December 31, 2016, 2015 and 2014, respectively.
Note 12.
Inventories
Finished products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Semi-finished products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Raw materials, stores and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment of inventories to LIFO basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
December 31,
2016
2015
532
150
285
967
(200)
767
$
613
172
433
1,218
(246)
972
Inventory values, before LIFO adjustment, are generally determined by the average cost method, which approximates current cost.
Inventories are valued using the LIFO method at substantially all of the U.S. locations, which comprised $465 and $657 or 48% and
54% of
inventories before the LIFO adjustments at December 31, 2016 and December 31, 2015, respectively. The remainder of
inventory held in international locations and certain U.S. locations is valued using the average cost method.
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Total unrecognized tax benefits as of December 31 . . . . . . . . . . . . . . . . . . . . . .
$
Gross amounts of decreases in unrecognized tax benefits as a result of adjustments
to tax provisions taken during the prior period . . . . . . . . . . . . . . . . . . . . . . . .
Gross amounts of increases in unrecognized tax benefits as a result of tax positions
taken during the current period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reduction to unrecognized tax benefits as a result of a lapse of the applicable
statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total unrecognized tax benefits, if recognized, that would impact the effective tax
rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total amount of interest and penalties recognized in the Consolidated Statements of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total amount of interest and penalties recognized in the Consolidated Balance
Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
— $
— $
(1)
—
—
6
—
—
—
—
(32)(1)
7
$
1(1)
—
(1) Reduction to the unrecognized tax benefits represents DuPont’s responsibilities for uncertain income tax positions recorded prior to
July 1, 2015 pursuant to the tax matters agreement. The reduction was recorded in “DuPont Company Net Investment” of the
The following is a rollforward of the deferred tax asset valuation allowance for the years ended December 31, 2016, 2015 and 2014.
(Dollars in millions)
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $
Net charges to income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Release of valuation allowance(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2016
2015
2014
$
36
—
(36)
50
—
50
26
(1)
15
(1)
39
39
2
8
26
10
—
36
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
The Chemours Company
PART II
The following table shows the change in our unrecognized tax benefit.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
(Dollars in millions)
Year Ended December 31,
2016
2015
2014
OF EQUITY SECURITIES
Total unrecognized tax benefits as of January 1 . . . . . . . . . . . . . . . . . . . . . . . .
$
7
$
39
$
Market for Registrant’s Common Equity and Related Stockholder Matters
The Company’s common stock is listed on the New York Stock Exchange, Inc. (symbol CC). The number of record holders of common
stock was 54,322 at February 14, 2017.
Holders of the Company’s common stock are entitled to receive dividends when they are declared by the board of directors. Dividends
on common stock are generally declared and paid on a quarterly basis. The Stock Transfer Agent and Registrar is Computershare Trust
Company, N.A.
The Company’s stock began trading on July 1, 2015. The quarterly high and low trading stock prices and dividends per common share
for 2016 and 2015 are shown below:
Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2015.
2015
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First Quarter
Market Prices
High
Low
Per Share
Dividend
Declared
$
$
$
$
27.29
16.08
10.83
7.84
8.80
16.68
$
$
14.41
5.82
6.99
3.06
4.58
5.94
0.03
0.03
0.03
0.03
0.03
0.55(1)
(1) Dividend was declared prior to our separation from DuPont and paid on September 11, 2015 to our stockholders of record as of
August 3, 2015.
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
— $
Unregistered Sales of Equity Securities
(1) Release of
the valuation allowance during 2015 was related to tax loss carryforward incurred prior to July 1, 2015 that is
attributable to DuPont’s tax periods pursuant to the tax matters agreement. The adjustment was recorded in the “DuPont Company
Issuer Purchases of Equity Securities
Net Investment” of the Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2015.
Not Applicable.
Note 10. Earnings Per Share of Common Stock
The table below shows a reconciliation of the numerator and denominator for basic and diluted earnings per share calculations for the
Not Applicable.
periods indicated.
Numerator:
Denominator:
Year Ended December 31,
2016
2015
2014
Net income (loss) attributable to Chemours . . . . . . . . . . . . . . . . . . . . . . .
$
7
$
(90)
$
400
Weighted average number of common shares outstanding – Basic . . . . . . .
181,621,422
180,993,623
180,966,833(1)
Dilutive effect of the Company’s employee compensation plans(2)
. . . . . . . .
1,795,078
—
—
Weighted average number of common shares outstanding – Diluted(2)
. . . . . .
183,416,500
180,993,623
180,966,833
(1) For 2014, pro forma earnings per share was calculated based on 180,966,833 shares of Chemours common stock that were
distributed to DuPont shareholders on July 1, 2015.
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1
Stock Performance Graph
The Chemours Company
The following graph presents the cumulative total shareholder return for the Company’s common stock compared with the Standard &
Poor’s (S&P) MidCap 400, S&P MidCap 400 Chemical and S&P SmallCap 600 indices since our separation from DuPont on July 1,
2015.
Total Stockholder Returns
200
180
160
140
120
100
80
60
40
20
0
6/30/2015
9/30/2015
12/30/2015
3/30/2016
6/30/2016
9/30/2016
12/30/2016
The Chemours Company
S&P MidCap 400
S&P MidCap 400 Chemical
S&P SmallCap 600
The graph assumes that the values of Chemours’ common stock, the S&P MidCap 400 index, the S&P MidCap 400 Chemical index
and the S&P SmallCap 600 index were each $100 on July 1, 2015, the date that Chemours’ common stock began “regular-way” trading
on the New York Stock Exchange, and that all dividends were reinvested. On January 29, 2016, Chemours moved from the S&P
MidCap 400 index to the S&P SmallCap 600 index. On January 3, 2017, Chemours moved from S&P SmallCap 600 index to the S&P
MidCap 400 index.
34
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Section 613 of the Code. Goodwill represents the tax effect of the non-deductible goodwill associated with asset sales that took place in
2016. In 2015, the goodwill adjustment was the tax impact of reallocations based on Chemours’ new business reporting units and
impairment charges, as described in Note 14. In addition, Chemours is entitled to a domestic manufacturing deduction relating to
income from certain qualifying domestic production activities pursuant to Section 199 of the Code in tax years 2014, as well as a
one-time tax benefit recognized in 2014 relating to a tax accounting method change. Due to net operating losses in 2015 and 2016, the
Company is not computing a benefit related to Section 199 in those years. Consistent with the discussion in Note 2, the pre-spin
effective tax rate stated herein may not be indicative of the future effective tax rate of Chemours as a result of the separation from
DuPont.
2025 and 2026.
open years listed:
Jurisdiction
Under the tax laws of various jurisdictions in which the Company operates, deductions or credits that cannot be fully utilized for tax
purposes during the current year may be carried forward or back, subject to statutory limitations, to reduce taxable income or taxes
payable in the future or prior years. At December 31, 2016, the U.S federal and state tax losses are $42, which substantially expire in
2035. The Company also has U.S. foreign tax credit carryforwards of $50, of which $27 expire in 2025 and $23 expire in 2026, which
are fully offset by a valuation allowance. Lastly, the Company has foreign net operating losses of $3, which substantially expire between
At December 31, 2016, the Company deemed approximately $2,100 of unremitted earnings of subsidiaries outside the U.S. as
indefinitely reinvested. No deferred tax liability has been recognized with regard to the remittance of such earnings. It is not practical to
estimate the income tax liability that might be incurred if such earnings were remitted to the U.S.
Each year, Chemours and/or its subsidiaries, files income tax returns in the U.S. federal jurisdiction and various states and non-U.S.
jurisdictions. The following significant jurisdictions’ tax returns are subject to examination by their respective taxing authorities in the
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 through 2016
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 through 2016
Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 through 2016
Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 through 2016
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 through 2016
Open Years
Positions challenged by the taxing authorities may be settled or appealed by Chemours and/or DuPont in accordance with the tax
matters agreement. As a result, income tax uncertainties are recognized in the Company’s consolidated financial statements in
accordance with accounting for income taxes, when applicable. Although it
is difficult
to predict
the timing, we estimate that
approximately $6 of unrecognized income tax benefits, excluding the impact relating to accrued interest and penalties, could be
resolved within the next twelve months as a result of an accounting method change request filed with the Internal Revenue Service in
the fourth quarter of 2016. We are not aware of any other matters that would result in significant changes to the amount of
unrecognized income tax benefits reflected in the Consolidated Balance Sheet as of December 31, 2016.
As previously discussed in Note 3, prior to the separation, Chemours was included in DuPont’s consolidated income tax returns, and
Chemours’ income taxes for those periods are computed and reported herein under the “separate return method”. Use of the separate
return method may result in differences when the sum of
the amounts allocated to stand-alone tax provisions are compared with
amounts presented in the consolidated financial statements. In that event, the related deferred tax assets and liabilities could be
significantly different from those presented herein for these periods. Certain tax attributes, e.g. net operating loss carryforwards, which
were actually reflected in DuPont’s consolidated financial statements may or may not exist at the stand-alone Chemours level.
Chemours’ consolidated financial statements do not reflect any amounts due to DuPont for income tax related matters prior to
separation as it is assumed that all such amounts due to DuPont were settled on December 31 of each year.
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Item 6.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The Chemours Company
An analysis of the Company’s effective tax rate is as follows:
(Dollars in millions)
Statutory U.S. federal income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
35.0 % $ (66)
35.0 % $ 192
35.0 %
State income taxes, net of federal benefit
. . . . . . . . . . . . . . . . . . . . . . . . .
150.4 %
(10)
5.1 %
6
1.0 %
Lower effective tax rate on international
operations – net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
552.5 %
(23)
12.0 %
Year Ended December 31,
2016
2015
2014
$
%
$
%
$
%
Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange losses (gains)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision to return and other adjustments . . . . . . . . . . . . . . . . . . . . . . . . .
Permanent items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 199 domestic manufacturing deduction . . . . . . . . . . . . . . . . . . . . . .
Other, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(451.6)%
—(1) — %
(4)
(16)
(61)
(6)
5
4
6
3
50
—
1
51.2 %
(47.9)%
(39.1)%
(57.9)%
(27.3)%
(—)%
(1.7)%
(6)
6
(1)
—
1
—
1
3.4 %
(3.2)%
0.5 %
— %
(0.5)%
— %
(0.2)%
(53)
(8)
—
15
—
(5)
11
(4)
(5)
(9.6)%
(1.5)%
— %
2.7 %
— %
(0.9)%
2.0 %
(0.7)%
(0.9)%
The following table presents Chemours’ selected historical consolidated financial data. The selected historical consolidated financial
data as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014 are derived from audited
information contained in Chemours’ consolidated financial statements included elsewhere in this Annual Report. The selected historical
consolidated financial data as of and for the years ended December 31, 2013 and 2012 are derived from Chemours’ audited
consolidated financial statements not included in this Annual Report.
The selected historical consolidated financial data for the periods ended December 31, 2012 through 2014 and for the first six months of
the year ended December 31, 2015 include certain expenses of DuPont that were allocated to Chemours for certain corporate functions
including information technology, research and development, finance, legal, insurance, compliance and human resources activities.
These costs may not be representative of the future costs Chemours will incur as an independent, publicly traded company. In addition,
Chemours’ historical financial information does not reflect changes that Chemours expects to experience in the future as a result of
Chemours’ separation from DuPont, including changes in Chemours’ cost structure, personnel needs, tax structure, capital structure,
financing and business operations. Consequently, the financial information included here may not necessarily reflect what Chemours’
financial position, results of operations and cash flows would have been had it been an independent, publicly traded company during
the periods presented. Accordingly, these historical results should not be relied upon as an indicator of Chemours’ future performance.
For a better understanding, this section should be read in conjunction with “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and the consolidated financial statements and accompanying notes included elsewhere in this
Annual Report on Form 10-K.
Total effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (18)
163.6 % $ (98)
52.1 % $ 149
27.1 %
Year Ended December 31,
(1) Release of
the valuation allowance during 2015 was related to tax loss carryforward incurred prior to July 1, 2015 that is
attributable to DuPont’s tax periods pursuant to the tax matters agreement and did not impact the effective tax rate as the
adjustment was recorded in the “DuPont Company Net Investment” of the Consolidated Statements of Stockholders’ Equity for the
year ended December 31, 2015.
(Loss) income before income taxes for U.S. and international operations was:
(Dollars in millions)
U.S. (including exports)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total (loss) income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
(481)
470
(11)
$
$
(492)
304
(188)
$
$
244
306
550
Year Ended December 31,
2016
2015
2014
Chemours recorded a tax benefit of $18 for the year ended December 31, 2016, a tax benefit of $98 for the year ended December 31,
2015 and a tax provision of $149 for the year ended December 31, 2014. The $80 decrease in tax benefits and the corresponding
change in the effective income tax rates were primarily due to a $50 valuation allowance recorded on U.S. foreign tax credits, the
Company’s geographical mix of earnings as well as the gain on the sale of assets and business, which resulted in a tax expense and a
corresponding change in the effective income tax rate for the year ended December 31, 2016 as compared to the same period in 2015;
offset by the tax benefit on the $335 PFOA MDL Settlement accrual (see Note 20).
The decrease in state income tax provision and the corresponding decrease in the state effective tax rate, net of federal tax benefit, for
the year ended December 31, 2016 when compared to 2015 and 2014 is due to the tax benefit recognized as a result of changes in
state tax law which decreased apportionment in states where the Company has significant operations as well as the state benefit of the
litigation accruals discussed above. The tax benefit from international operations is primarily driven by Chemours’ overall geographic
mix of earnings as well as gains on foreign divestitures that were not subject to tax. In comparing the impact of foreign operations on
our overall effective tax rate from 2015 to 2016, the significant driver of the change in the benefit is a reduction in the pre-tax loss within
the US while income from foreign operations has increased over the prior period.
The Company recorded a valuation allowance of $50 as of December 31, 2016 on its U.S. foreign tax credits based on available
positive and negative evidence. For the three years ended December 31, 2016, the Company has incurred pre-tax losses in the U.S.,
which limit the ability to consider other subjective evidence such as the Company’s projections for future growth. The amount of the
foreign tax credits that are considered realizable, however, could be adjusted if estimates of
future taxable income during the
carryforward period increase or if objective negative evidence in the form of cumulative losses is no longer present. Exchange gains
(losses) principally reflect the impact of non-taxable gains and losses resulting from remeasurement of foreign currency-denominated
monetary assets and liabilities. Depletion represents the tax benefit from the percentage depletion deductions taken pursuant to
(Dollars in millions, except per share data)
2016
2015
2014
2013
2012
Summary of operations:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and asset related charges, net . . . . . . . . . . . . . . . . . . . . . .
(Loss) income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Benefit from) provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Chemours . . . . . . . . . . . . . . . . . . . . . . .
Basic earnings (loss) per share of common stock(1)
. . . . . . . . . . . . . . . . .
Diluted earnings (loss) per share of common stock(1)
. . . . . . . . . . . . . . . .
Financial position at year end:
Working capital(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings and capital lease obligations, net(3)
. . . . . . . . . . . . . . . . . . . .
General:
Purchases of property, plant and equipment
. . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends per common share(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$ 5,400
170
(11)
(18)
7
0.04
0.04
$ 5,717
333
(188)
(98)
(90)
(0.50)
(0.50)
$ 6,432
21
550
149
400
2.21
2.21
$ 6,859
2
576
152
423
2.34
2.34
782
6,060
3,544
338
284
0.12
835
6,298
3,954
519
267
0.58
543
5,959
1
604
257
—
474
5,580
1
438
261
—
7,365
36
1,485
427
1,057
5.84
5.84
601
5,309
1
432
266
—
(1) For 2012-2014, pro forma earnings per share was calculated based on 180,996,833 shares of Chemours common stock that were
distributed to DuPont shareholders on July 1, 2015. The same number of shares was used to calculate basic and diluted earnings
per share since no Chemours equity awards were outstanding prior to the separation.
(2) Current assets minus current liabilities. Current assets include cash and cash equivalents of $902 million and $366 million at
December 31, 2016 and 2015, respectively. Years prior to 2015 do not include any cash, as Chemours’ needs were provided by its
former parent, DuPont.
(3) Amounts as of December 31, 2016 and 2015 include unamortized debt issuance costs and discount of $47 million and $60 million,
respectively.
(4) Dividends per common share for the year ended December 31, 2015 includes the following:
•
•
dividend of an aggregate amount of $100 million declared prior to separation by our then-board of directors (consisting of
DuPont employees), which was paid on September 11, 2015 to our stockholders of record as of August 3, 2015, and
dividend of $0.03 per share declared after separation by our independent board of directors which was paid on December 14,
2015 to our stockholders of record as of November 13, 2015.
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149996_85669 Chemours Company Annual Report_Text Signature 4 Side B Yellow
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149996_85669 Chemours Company Annual Report_Text Signature 4 Side B Cyan
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Chemours Company
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Introduction
Management’s discussion and analysis, which we refer to as “MD&A”, of our results of operations and financial condition supplements
the consolidated financial statements and related notes included elsewhere herein to help provide an understanding of our financial
condition, changes in financial condition and results of our operations. The discussion and analysis presented below refer to and should
be read in conjunction with the consolidated financial statements and the related notes included elsewhere in this Annual Report on
Form 10-K.
Note 9.
Income Taxes
(Dollars in millions)
Current tax expense:
Overview
Chemours is a leading global provider of performance chemicals that are key inputs in end-products and processes in a variety of
industries. We deliver customized solutions with a wide range of industrial and specialty chemical products for markets including plastics
and coatings, refrigeration and air conditioning, general industrial, mining and oil refining. Principal products include titanium dioxide,
refrigerants, industrial fluoropolymer resins and a portfolio of mining and industrial chemicals including sodium cyanide.
Chemours manages and reports operating results through three reportable segments: Titanium Technologies, Fluoroproducts and
Chemical Solutions. Our position with each of these businesses reflects the strong value proposition we provide to our customers based
on our long history and reputation in the chemical industry for safety, quality and reliability.
On July 1, 2015, DuPont completed the previously announced spin-off of Chemours by distributing Chemours’ common stock, on a pro
rata basis, to DuPont’s stockholders of record as of the close of business on June 23, 2015 (the Record Date). Each holder of DuPont
common stock received one share of Chemours’ common stock for every five shares of DuPont’s common stock held on the Record
Date. The Separation was completed pursuant to a separation agreement and several other agreements with DuPont, including an
employee matters agreement, a tax matters agreement, a transition services agreement and an intellectual property cross-license
agreement, each of which was filed with the SEC as an exhibit to our Current Report on Form 8-K on July 1, 2015. These agreements
govern the relationship among Chemours and DuPont following the Separation and provide for the allocation of various assets,
liabilities, rights and obligations. These agreements also include arrangements for transition services provided by DuPont to Chemours,
which was substantially completed during 2016.
Basis of Presentation
Prior to July 1, 2015, Chemours operations were included in DuPont’s financial results in different legal forms, including but not limited
to wholly-owned subsidiaries for which Chemours was the sole business, components of legal entities in which Chemours operated in
conjunction with other DuPont businesses and a majority owned joint venture. For periods prior to July 1, 2015, the consolidated
financial statements, included elsewhere in this Annual Report on Form 10-K, have been prepared from DuPont’s historical accounting
records and are presented on a stand-alone basis as if the business operations had been conducted independently from DuPont. The
consolidated financial statements include the historical operations, assets and liabilities of
the legal entities that are considered to
comprise the Chemours business, including certain environmental remediation and litigation obligations of DuPont and its subsidiaries
that Chemours may be required to indemnify pursuant to the separation-related agreements executed prior to the Separation. All of the
allocations and estimates in the consolidated financial statements prior to July 1, 2015 are based on assumptions that management
believes are reasonable.
Year Ended December 31,
2016
2015
2014
U.S. federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $
U.S. state and local
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax (benefit) expense:
U.S. federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. state and local
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax benefit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
93
93
(101)
(17)
7
(111)
37(1) $
1(1)
62
100
(187)
(14)
3
(198)
Total (benefit from) provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . .
$
(18)
$
(98)
$
(1) Recorded pursuant to the tax matters agreement.
The significant components of deferred tax assets and liabilities are as follows:
(Dollars in millions)
Deferred tax assets:
December 31,
December 31,
2016
2015
Environmental and other reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Litigation reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation and accrued employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets and other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
Pension and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
150
149
35
27
95
456
(50)
406
(16)
(441)
(40)
(497)
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(91) $
85
13
73
171
(20)
(3)
1
(22)
149
158
22
42
35
124
381
—
381
(7)
(530)
(31)
(568)
(187)
36
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Recent Developments
The Chemours Company
On April 22, 2016, the Company entered into a stock and asset purchase agreement with LANXESS Corporation, (“Lanxess”), pursuant
Transformation Plan
After the separation in 2015, Chemours announced a plan to transform the company by reducing structural costs, growing market
positions, optimizing its portfolio, refocusing investments, and enhancing its organization. Chemours expects the transformation plan to
deliver $500 million of incremental Adjusted EBITDA improvement over 2015 through 2017. Based on our anticipated cost reduction and
growth initiatives, we expect that our cost savings of approximately $350 million and approximately $150 million in improvements from
growth initiatives will also improve our pre-tax earnings by similar amounts through 2017. Through year-end 2016, we achieved
approximately $200 million in cost savings, and we continue to implement additional cost reduction initiatives in order to realize our
target of reducing structural costs. These improvements will be partially offset by the impact of divestitures completed during 2016
(discussed under “Chemical Solutions Portfolio Optimization Actions” below), unfavorable price and mix of fluoropolymer products, and
may also be impacted by market factors. Results of our transformation actions are also discussed in the Results of Operations,
Segment Reviews and Outlook sections of this MD&A.
4
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and the Company incurred approximately $11 of transaction and other related charges. As a result of this transaction, for the year
Chemical Solutions Portfolio Optimization Actions
ended December 31, 2016, Chemours recognized a pre-tax gain in the Chemical Solutions segment of approximately $88 recorded in
On June 13, 2016, the Company entered into an asset purchase agreement with Veolia North America (“Veolia”), pursuant to which
Veolia agreed to acquire Chemours’ Sulfur Products business (“Sulfur business”) of its Chemical Solutions segment for a purchase
price of $325 million in cash, subject to customary working capital and other adjustments, of which approximately $10 million was
received in May 2016. The Company completed the sale on July 29, 2016 and received the remaining proceeds of approximately $311
million, net of estimated working capital adjustments.
On April 22, 2016, the Company entered into a Stock and Asset Purchase Agreement with Lanxess, pursuant to which Lanxess agreed
to acquire Chemours’ Clean & Disinfect product line (the “C&D business”) by acquiring certain Chemours’ subsidiaries and assets
comprising the C&D business for a purchase price of $230 million in cash, subject to customary working capital and other adjustments.
The Company completed the sale on August 31, 2016 and received $223 million of cash, net of working capital adjustments and
approximately $2 million of cash transferred.
On March 1, 2016, the Company completed the sale of its aniline facility in Beaumont, Texas to The Dow Chemical Company (Dow) for
a cash proceeds of approximately $140 million. As part of this transaction, Chemours also entered into a supply agreement with an
initial two-year term to supply Dow with its additional aniline requirements from Chemours’ Pascagoula, Mississippi production facility.
The Company expects to use the proceeds from the above sales to fund our future capital expenditures.
Settlement of PFOA MDL Litigation
As previously reported, approximately 3,500 lawsuits have been filed in various federal and state courts in Ohio and West Virginia
alleging personal injury from exposure to perfluorooctanoic acid and its salts, including the ammonium salt (“PFOA”), in drinking water
as a result of the historical manufacture or use of PFOA at the Washington Works plant outside Parkersburg, West Virginia. That plant
was previously owned and/or operated by the performance chemicals segment of DuPont and is now owned and/or operated by
Chemours. These personal
injury lawsuits were consolidated in multi-district litigation in the United States District Court for the
Southern District of Ohio (the “MDL”). See Item 3. Legal Proceedings and our Note 20 to the Consolidated Financial Statements
included elsewhere in this Annual Report.
On February 11, 2017, DuPont entered into an agreement in principle with plaintiffs’ counsel representing the MDL plaintiffs providing
for a global settlement of all cases and claims in the MDL, including all filed and unfiled personal injury cases and claims that are part of
the plaintiffs’ counsel’s claim inventory, as well as cases that have been tried to a jury verdict (the “MDL Settlement”). The total
settlement amount is $670.7 million dollars in cash, half of which will be paid by Chemours and half paid by DuPont. DuPont’s payment
would not be subject to indemnification or reimbursement by Chemours, and Chemours has accrued $335 million associated with this
matter at December 31, 2016. In exchange for payment of the total settlement amount, DuPont and Chemours will receive a complete
release of all claims by the settling plaintiffs. The MDL Settlement was entered into solely by way of compromise and settlement and is
not in any way an admission of liability or fault by DuPont or Chemours. The MDL Settlement is not subject to court approval; however,
the MDL Settlement may not proceed in certain conditions, including a walk-away right that enables DuPont to terminate the MDL
Settlement if more than a specified number of plaintiffs determine not to participate.
F-20
37
to which Lanxess agreed to acquire the C&D business of Chemours’ Chemical Solutions segment by acquiring certain Chemours’
subsidiaries and assets for a purchase price of $230 in cash, subject to customary working capital and other adjustments. The
Company completed the sale and received proceeds of $223 on August 31, 2016, net of working capital adjustments and approximately
$2 of cash transferred. As a result, for the year ended December 31, 2016, the Company recorded a pre-tax gain of approximately
$169 in “Other income, net” in the Consolidated Statement of Operations. The net book values of the assets and liabilities disposed
were $48 (including goodwill of $13) and $6, respectively, and the Company incurred approximately $9 of transaction and other related
charges.
In November 2015, the Company signed a definitive agreement to sell its aniline facility in Beaumont, Texas to The Dow Chemical
Company (“Dow”), and the net book value of the related asset group (including goodwill) was classified as assets held-for-sale at
December 31, 2015 included in “Prepaid expenses and other” of the Consolidated Balance Sheet. The transaction closed on March 1,
2016 and Chemours received $140 in cash from Dow. The net book value of the assets disposed was $41 (including goodwill of $4),
“Other income, net” in the Consolidated Statement of Operations.
The aggregate amount and major components of assets and liabilities disposed during the year ended December 31, 2016 are as
follows:
Current assets:
December 31,
2016
Accounts receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Impairment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-current assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets disposed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
22
17
39
298
17
136
(58)
393
432
17
17
415
Note 8. Other Income (Expense), Net
Leasing, contract services and miscellaneous income(1)
. . . . . . . . . . . . . . . . . . . . . .
$
Royalty income(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain (loss) on sale of assets and businesses(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange (losses) gains, net(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
35
15
254
(57)
247
$
$
25
19
(9)
19
54
$
$
17
28
40
(66)
19
Year Ended December 31,
2016
2015
2014
(1) Miscellaneous income includes accrued interest related to unrecognized tax benefits.
(2) Royalty income is primarily for technology and trademark licensing.
(3) The twelve months ended December 31, 2016 includes a gain on sale of C&D business and aniline factory; and a loss on sale of
Sulfur business. See Note 7 for further details.
(4) Exchange losses, net includes gains and losses on foreign currency forward contracts. See Note 21 for additional information.
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is exceeded, DuPont would pay any excess amount up to the next $25 million (which payment will not be subject
DuPont and Chemours have also agreed, subject to and following the completion of
the MDL Settlement, to a limited sharing of
potential future PFOA liabilities (i.e., “indemnifiable losses,” as defined in the separation agreement between DuPont and Chemours) for
a period of five years. During that five-year period, Chemours would annually pay future PFOA liabilities up to $25 million and, if such
to
amount
indemnification by Chemours), with Chemours annually bearing any further excess liabilities under the terms of
the separation
agreement. After the five-year period, this limited sharing agreement would expire, and Chemours’ indemnification obligations under the
separation agreement would continue unchanged. Chemours has also agreed that, upon the MDL Settlement becoming effective, it will
not contest its liability to DuPont under the separation agreement for PFOA liabilities on the basis of ostensible defenses generally
applicable to the indemnification provisions under the separation agreement, including defenses relating to punitive damages, fines or
penalties or attorneys’ fees, and waives any such defenses with respect to PFOA liabilities. Chemours has, however, retained defenses
as to whether any particular PFOA claim is within the scope of the indemnification provisions of the separation agreement.
Our Results and Business Highlights
Net sales for the year ended December 31, 2016 were $5.4 billion, a decrease of 6% from $5.7 billion for the year ended December 31,
2015. These decreases were driven primarily by the portfolio changes from divestitures in the Chemical Solutions segment and lower
average selling price for TiO2, partially offset by volume increase in in the Fluoroproducts segment due to growth in Opteon™ and
volume increase in Titanium Technologies segment.
We recognized net income of $7 million for the year ended December 31, 2016 compared with a net loss of $90 million for the year
ended December 31, 2015. Our results for the year reflect $254 million of net gain on sale of assets and business in the Chemical
Solutions segment, improvements from cost reductions initiatives and strong Fluoroproducts performance, offset by $335 million
litigation accrual related to the PFOA MDL Settlement and $119 million of asset impairment charges in the Chemicals Solutions and
Corporate and Other segments.
Our Adjusted EBITDA was $822 million for the year ended December 31, 2016 compared with $573 million for the year ended
December 31, 2015. Our 2016 results reflect margin improvements in Titanium Technologies, improved profitability in Fluoroproducts,
including growth in Opteon™ sales, and improvements from cost reductions initiatives, partially offset by the impact of divestitures
within the Chemical Solutions segment.
Results of Operations
Year Ended December 31,
2016
2015
2014
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expense(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and asset related charges, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment
5,400
4,290
1,110
934
80
170
—
$
$
5,717
4,762
955
632
97
333
25
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,184
1,087
Equity in earnings of affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income, net
(Loss) income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Benefit from) provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Chemours . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
29
(213)
247
(11)
(18)
7
—
7
22
(132)
54
(188)
(98)
(90)
—
$
(90) $
6,432
5,072
1,360
685
143
21
—
849
20
—
19
550
149
401
1
400
(1)
Includes $335 million litigation accrual related to the PFOA MDL Settlement (see Note 20 to the Consolidated Financial
Statements).
respectively.
38
F-19
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
2015 Global restructuring
In November 2015, Chemours announced an additional global workforce reduction of approximately 430 positions. This action is part of
ongoing efforts to streamline and simplify the structure of the organization worldwide and to reduce costs. As a result of these actions,
the Company recorded approximately $48 of employee separation costs during the fourth quarter of 2015. The associated headcount
reductions were completed as of December 31, 2016, and all related payments are expected to be completed in 2017.
In June 2015, in light of continued weakness in the global titanium dioxide market cycle and continued foreign currency impacts due to
the strengthening of the U.S. dollar, Chemours implemented a restructuring plan to reduce and simplify its cost structure. This plan
resulted in a global workforce reduction of more than 430 positions. As a result, we recorded a pre-tax charge of $64 for employee
separation costs in the year ended December 31, 2015. All actions associated with this charge were completed as of December 31,
2016.
In 2014, Chemours implemented a restructuring plan to increase productivity and recorded a pre-tax charge of $19 related to this
initiative. The charge consisted of $16 related to employee separation costs and $3 for asset shut-down costs. All actions associated
4
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with this charge were completed as of December 31, 2015.
The following table shows the change in the employee separation related liability account associated with the restructuring programs:
Year ended December 31, 2014 . . . . . . . . . . . . . . . . . . $
— $
— $
— $
— $
—
Titanium
Fluoroproducts
Technologies
Site Closures
Lines
Chemical
Solutions
2015 Global
Shutdown
Site Closures
Restructuring
Total
Year ended December 31, 2015 . . . . . . . . . . . . . . . . . . $
11 $
2 $
12 $
73 $
Charges to income for the year ended December 31,
2015(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charges to liability accounts:
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net currency translation and other adjustment(2) . . . . . .
Charges (credits) to income for the year ended
December 31, 2016(1)
. . . . . . . . . . . . . . . . . . . . . . .
Charges to liability accounts:
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net currency translation and other adjustment(2) . . . . . .
11
—
—
(7)
—
2
—
—
(1)
—
12
—
(2)
(1)
(1)
112
137
(39)
6
1
(59)
(39)
—
98
4
(68)
—
34
Balance as of December 31, 2016 . . . . . . . . . . . . . . . . $
4 $
1 $
8 $
21 $
(1) Due to unexpected resignations of certain employees at the Company’s Niagara site during 2016, approximately $2 of employee
separation charges, related to the RMS plant closure, were reversed to income during the year ended December 31, 2016.
(2) Amounts include net currency translation adjustment of less than $1 for the period presented and rounding differences.
There are no significant outstanding liabilities related to the decommissioning and other restructuring related charges.
Note 7. Sales of Assets and Businesses
On June 13, 2016, the Company entered into an asset purchase agreement with Veolia North America (“Veolia”), pursuant to which
Veolia agreed to acquire the Sulfur business of Chemours’ Chemical Solutions segment for a purchase price of $325 in cash, subject to
customary working capital and other adjustments, of which approximately $10 was received in May 2016. The Company completed the
sale and received the remaining proceeds of approximately $311 on July 29, 2016, net of estimated working capital adjustments. Prior
to the completion of
the sale, in the second quarter of 2016, the Company recorded an impairment loss of approximately $58 in
“Restructuring and asset related charges, net” of
the Consolidated Statement of Operations. When the sale was completed, the
Company also recorded an additional pre-tax loss on sale of approximately $4, net of a benefit from contract adjustments, in “Other
income, net” in the Consolidated Statement of Operations. The net book value of the assets and liabilities disposed were $342 and $11,
5
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Net sales
The Chemours Company
The charges related to the restructuring programs impacted segment earnings for the years ended December 31, 2016, 2015 and 2014
are as follows:
Plant and product line closures(1)
Titanium Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
30
$
140
$
Fluoroproducts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chemical Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sub-total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global restructuring(2)
Titanium Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fluoroproducts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chemical Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sub-total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2016
2015
2014
7
8
45
2
4
—
6
51
24
12
176
33
54
25
112
288
—
—
—
—
3
16
—
19
19
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
(1)
Includes charges related to employee separation, decommissioning and dismantling costs, and asset related charges in
connection with the restructuring activities.
For the years ended December 31, 2016 and 2015: Net sales for the year ended December 31, 2016 were $5.4 billion, a decrease
of approximately 6% compared to $5.7 billion for the year ended December 31, 2015. The decrease in net sales for the year ended
December 31, 2016 was driven by: i) portfolio changes from divestitures and lower selling prices resulting from the impact of lower raw
materials costs on contractual pass-through terms in the Chemical Solutions segment and ii) lower selling prices for TiO2 year over year
in the Titanium Technologies segment. These decreases were partially offset by improvements in the Fluoroproducts segment due to
growth in Opteon™ and volume increase in Titanium Technologies due to higher demand in Europe and the United States.
For the years ended December 31, 2015 and 2014: Net sales for the year ended December 31, 2015 were of $5.7 billion, a
decrease of approximately 11% compared to $6.4 billion for the year ended December 31, 2014. The decrease in net sales was
primarily due to continued pressure on TiO2 prices and the negative impact of foreign currency, partially offset by price increases in
Fluoroproducts and volume growth in Chemical Solutions portfolio.
The table below shows the impact of price, volume, currency and portfolio changes on net sales for the years ended December 31,
2016, 2015 and 2014.
Change in net sales from prior period
Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Portfolio/Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2016
2015
(3)%
2%
(1)%
(4)%
(6)%
(5)%
(1)%
(4)%
(1)%
(11)%
(2)
Includes approximately $24 related to corporate overhead functions that was allocated to the segments for the year ended
For detailed discussion of net sales, see the Segment Review section of this MD&A.
Cost of goods sold
December 31, 2015.
Plant and product line closures
Titanium Technologies Plant and Product Line Closures:
In August 2015, the Company announced the closure of its Edge Moor,
Delaware manufacturing site located in the U.S. The Edge Moor plant produced TiO2 product for use in the paper industry and other
applications where demand had steadily declined, resulting in underused capacity at the plant. In addition, the Company permanently
shut down one underused TiO2 production line at its New Johnsonville, Tennessee plant. The Company stopped production at Edge
Moor in September 2015 and immediately began decommissioning the plant. These actions resulted in the write-off of substantially all
of the Edge Moor plant asset carrying value in 2015.
As a result, for the year ended December 31, 2015, the Company recorded charges of approximately $140, which consisted of
employee separation costs of $11, property, plant and equipment and other asset impairment charges of $115, and decommission
costs and other charges of $14. For the year ended December 31, 2016, the Company recorded additional charges of approximately
$30, which relates to decommissioning, dismantling and removal activities. The Company substantially completed the dismantling and
removal activities in January 2017.
For the years ended December 31, 2016 and 2015: Cost of goods sold (COGS) decreased by 10% to $4.3 billion for the year ended
December 31, 2016 compared to $4.8 billion for the year ended December 31, 2015. The decreases were primarily driven by lower
operating costs, including lower raw materials and overhead costs, and improvement in plant utilization, which decreased COGS by
approximately 7%, and portfolio changes in our Chemical Solutions segment, which also decreased COGS by approximately 4%. These
decreases were partially offset by inventory write-downs in the Chemical Solutions segment of $10 million as a result of the reactive
metals solution plant shutdown, $5 million assets write-off related to the Mining Solutions business of our Chemical Solutions segment,
and approximately $10 million increase in performance related compensation accruals.
For the years ended December 31, 2015 and 2014: COGS decreased 6% during the year ended December 31, 2015 in comparison
with the year ended December 31, 2014. Approximately 4% of the decrease was driven by lower production costs from lower costs of
raw materials, lower employee benefits and the impact of global headcount reduction as a result of our transformation plan. The
decrease was due to lower sales volume and mix, as well slightly favorable currency impact.
Fluoroproducts Restructuring: Also,
in August 2015,
in an effort
to improve the profitability of
the Fluoroproducts segment,
Selling, general and administrative expense
management approved the shutdown of certain production lines of the segment’s manufacturing facilities in the U.S. As a result, for the
year ended December 31, 2015, the Company recorded restructuring charges of approximately $21, which consist of property, plant
and equipment accelerated depreciation of $18, employee separation costs of $2, and decommissioning and other costs of $1. For the
year ended December 31, 2016, the Company recorded additional charges of approximately $7, which relates to decommissioning,
dismantling and removal activities. The Company expects to incur additional charges of approximately $3 for decommissioning,
dismantling and removal costs in 2017, which will be expensed as incurred.
RMS Plant Closure:
In the fourth quarter of 2015, the Company announced the completion of
the strategic review of
its RMS
business and the decision to stop production at the Niagara Falls, New York site. The Niagara Falls plant has approximately 200
employees and contractors impacted by this action. The production stopped in September 2016 and the Company immediately began
decommissioning the plant.
As a result, for the year ended December 31, 2015, the Company recorded approximately $12 of employee separation costs. For the
year ended December 31, 2016, the Company recorded approximately $8, which consist of contract termination charges of $2 and
decommissioning and other related charges of $6. Additional restructuring charges of approximately $9 for decommissioning and site
redevelopment are expected to be incurred in 2017. Impairment of RMS related assets were recorded in the third quarter of 2015 (see
Note 13 for further information).
For the years ended December 31, 2016 and 2015: Selling, general and administrative (SG&A) expense increased 48% to $934
million for the year ended December 31, 2016 compared to $632 million for the year ended December 31, 2015. The increase in SG&A
was primarily driven by the $335 million litigation accrual related to the PFOA MDL Settlement. In addition, the increase in SG&A
includes an increase in performance related compensation accruals of approximately $36 million, higher transaction costs incurred
primarily in connection with the sale of the C&D and Sulfur businesses of approximately $10 million and other legal settlements and
related costs of $16 million. These increases were partially offset by lower pension costs and cost reduction initiatives, including the
global workforce reduction and other initiatives in connection with the transformation plan, which contributed to an approximate 15%
reduction in SG&A.
For the years ended December 31, 2015 and 2014: SG&A expense decreased 8% to $632 million for the year ended December 31,
2015 in comparison with the year ended December 31, 2014. This decrease is primarily driven by the cost reduction initiatives
implemented during the year, such as the global workforce reduction and other initiatives in connection with the transformation plan, as
well as lower employee benefits (including pension), slightly offset by $17 million of transactions, legal and other related charges and
approximately $4 million higher stock-based compensation charges primarily related to the converted DuPont awards.
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Research and development expense
The Chemours Company
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
For the years ended December 31, 2016 and 2015: Research and development (R&D) expense decreased by $17 million or 18% for
the year ended December 31, 2016 in comparison with the year ended December 31, 2015. Reductions in R&D spend were primarily
driven by decisions to focus on fewer higher return projects. The global workforce reduction initiative also impacted the R&D function
and contributed to the overall decrease.
Tax Matters Agreement
For the years ended December 31, 2015 and 2014: R&D expense decreased by $46 million or 32% for the year ended
December 31, 2015 in comparison with the year ended December 31, 2014. Reductions in R&D spend were primarily driven by
decisions to either delay or terminate projects following our separation from DuPont. The global workforce reduction initiative also
impacted the R&D function and contributed to the decrease in R&D expense.
Restructuring and asset related charges, net
For the years ended December 31, 2016 and 2015: We recorded pre-tax charges of approximately $170 million in connection with
the various restructuring activities implemented since 2015. This included $45 million of decommissioning, dismantling and other
related charges, which consisted of $30 million related to the Edge Moor manufacturing plant closure in the Titanium Technology
segment, $7 million related to the production lines shutdown in the Fluoroproducts segment, and $8 million related to the reactive
metals solution (“RMS”) manufacturing facility plant closure in the Chemicals Solutions segment. Also, during 2016, we recorded $119
million of asset impairment charges, which consisted of $48 million related to the aniline facility in Pascagoula, Mississippi and $58
million asset impairment charges in connection with the sale of
the Sulfur business, both of which are in the Chemical Solutions
segment, and $13 million in connection with the sale of our corporate headquarters building in the U.S. included in Corporate and Other.
For the years ended December 31, 2015 and 2014: We recorded pre-tax charges of approximately $333 million for employee
separation and other asset related charges in connection with various restructuring activities during the year. This cost included $112
million severance charges from our global workforce reduction, $140 million related to our capacity optimization in our Titanium
Technologies segment, including the closure of our Edge Moor production facility, $21 million of Fluoroproducts restructuring activities,
$57 million of restructuring relating to our Chemical Solutions segment, and impairment charges.
Refer to Note 6 to the Consolidated Financial Statements for additional information related to “Restructuring and asset related charges,
net”.
Interest expense, net
For the years ended December 31, 2016 and 2015: We incurred interest expense of $213 million and $132 million for the years
ended December 31, 2016 and 2015, respectively. Interest expense was higher in 2016 because the long-term debt was issued in
May 2015 and was outstanding for the entirety of the 2016 fiscal year. In addition, we recorded approximately $4 million of non-cash
in connection with the
write off of unamortized debt
February 2016 amendment to our credit agreement. These increases were partially offset by approximately $10 million of net gain on
debt extinguishment in 2016.
issuance costs attributable to the reduction in our revolver commitment
For the years ended December 31, 2015 and 2014: We incurred interest expense of $132 million for the year ended December 31,
2015 related to our financing transactions completed in May 2015 in connection with the separation. There was no comparable expense
in 2014.
Refer to Note 19 to the Consolidated Financial Statements and the Liquidity and Capital Resources section of this MD&A for additional
information related to our indebtedness.
Other income, net
For the years ended December 31, 2016 and 2015: For the year ended December 31, 2016, other income, net increased by $193
million when compared to the year ended December 31, 2015. This increase includes a $254 million gain on sale primarily in connection
with the sale of our C&D business and the sale of our aniline facility in Beaumont, Texas, partially offset by foreign currency exchange
losses of approximately $57 million driven by continued strengthening of the U.S. dollar primarily against the Mexican peso compared to
a foreign currency exchange gain of $19 million in 2015, which was mainly driven by the net gain from foreign currency forward
contracts.
The tax matters agreement
that Chemours and DuPont entered into governs the parties’ respective rights, responsibilities and
obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and
other tax proceedings and other matters regarding taxes. In general, under the agreement, DuPont is responsible for any U.S. federal,
state and local taxes (and any related interest, penalties or audit adjustments) reportable on a consolidated, combined or unitary return
that includes DuPont or any of its subsidiaries and Chemours and/or any of its subsidiaries for any periods or portions thereof ending
on or prior to the date of the separation and Chemours is responsible for any U.S. federal, state, local and foreign taxes (and any
related interest, penalties or audit adjustments) that are imposed on Chemours and/or any of its subsidiaries for all tax periods, whether
before or after the date of the separation.
Note 5. Research and Development Expense
Research and development expense directly incurred by Chemours was $80, $87 and $94 for the years ended December 31, 2016,
2015 and 2014, respectively. Research and development expense for the years ended December 31, 2015 and 2014 includes $10 and
$49, respectively, which represents an assignment of costs associated primarily with DuPont’s Corporate Central Research and
Development long-term research activities. This assignment was based on the cost of research projects for which Chemours was
determined to be the sponsor or co-sponsor. All research services previously provided by DuPont’s Central Research and Development
to Chemours were specifically requested by Chemours, covered by service-level agreements and billed based on usage. DuPont
research and development services were no longer used after the separation on July 1, 2015.
Note 6. Restructuring and Asset Related Charges, Net
For the years ended December 31, 2016, 2015 and 2014, Chemours recorded charges for employee separation and asset related
charges as follows:
Restructuring Related Charges:
Employee Separation Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
137
$
Decommissioning and other charges, net – Restructuring . . . . . . . . . . . . . . . . .
Asset Related Charges – Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total restructuring charges, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset Related Charges – Impairment(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total restructuring and asset related charges, net
. . . . . . . . . . . . . . . . . . . . . . .
$
$
333
$
Year Ended December 31,
2016
2015
2014
4
47
—
51
119
170
18
133
288
45
18
—
3
21
—
21
(1)
Impairment charges for the year ended December 31, 2016 include $48 of impairment charges related to the aniline facility in
Pascagoula, Mississippi (see Note 13 for further information), $58 of impairment charges in connection with the sale of the Sulfur
business (see Note 7 for further information), and $13 of
impairment charges in connection with the sale of
the Company’s
corporate headquarters building (see Note 15 for further information). Impairment charges for the year ended December 31, 2015
represent asset impairment related to the reactive metals manufacturing facility (see Note 13 for further information).
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
arrangement does not include a software license, the customer should account for the arrangement as a service contract. This
guidance is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015, and
early adoption is permitted. Chemours adopted this guidance effective January 1, 2016 prospectively to all arrangements entered into or
materially modified after the effective date. The adoption did not have a significant impact on our financial position or results of
operations.
In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis”. The
amendments modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or
voting interest entities and eliminate the presumption that a general partner should consolidate a limited partnership. The amendment is
effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15,
2015. Chemours adopted this guidance effective January 1, 2016 and the adoption did not change our consolidated entities, and
therefore had no impact on the Company’s financial position, results of operations and cash flows.
In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements — Going Concern”. The update requires
management to evaluate whether there is substantial doubt about a company’s ability to continue as a going concern and to provide
related footnote disclosures. The update is effective for the annual period ending after December 15, 2016, and for annual periods and
interim periods thereafter. Early adoption is permitted. Chemours adopted the guidance effective December 31, 2016. No disclosure
was considered necessary as of December 31, 2016 as a result of management’s evaluation.
Note 4. Relationship with DuPont and Related Entities
Prior to the separation, Chemours sold finished goods to DuPont and its non-Chemours businesses. Related party sales to DuPont
recorded by Titanium Technologies, Fluoroproducts and Chemical Solutions for the year ended December 31, 2015 were $2, $34 and
$21, respectively, and for the year ended December 31, 2014 were $0, $45 and $65, respectively. Subsequent to the separation,
beginning on July 1, 2015, transactions with DuPont businesses were not considered related party transactions.
Also prior to the separation, DuPont incurred significant corporate costs for services provided to Chemours as well as other DuPont
businesses. These costs included expenses for information systems, accounting, other financial services such as treasury and audit,
purchasing, human resources, legal, facilities, engineering, corporate research and development, corporate stewardship, marketing and
business analysis support. A portion of
these costs benefited multiple or all DuPont businesses, including Chemours, and were
allocated to Chemours and its reportable segments using methods based on proportionate formulas involving total costs or other
various allocation methods that management considered consistent and reasonable. Other Chemours corporate costs are not allocated
to the reportable segments and are reported in Corporate and Other.
The allocated leveraged functional service expenses and general corporate expenses included in the Consolidated Statements of
Operations were $238 and $492 for the years December 31, 2015 and 2014, respectively, and were recorded within cost of goods sold,
selling, general and administrative expense and research and development expense for $23, $205 and $10, respectively, for the year
ended December 31, 2015, and $32, $411 and $49, respectively, for the year ended December 31, 2014. Subsequent to the separation
on July 1, 2015, transactions with DuPont businesses were not considered related party transactions. Accordingly, no costs from DuPont
were allocated to Chemours after July 1, 2015.
Cash Management and Financing
The separation agreement sets forth a process to true-up cash and working capital transferred to us from DuPont at separation. In
January 2016, Chemours and DuPont entered into an agreement, contingent upon the credit agreement amendment (described in Note
19), which provided for the extinguishment of payment obligations of cash and working capital true-ups previously contemplated in the
separation agreement. As a result, Chemours is no longer required to make any payments to DuPont, nor will DuPont make any
payments to Chemours.
In addition,
the agreement set
forth an advance payment by DuPont of approximately $190, which Chemours received in
February 2016, for certain specified goods and services that Chemours expects to provide to DuPont through mid-2017 under existing
agreements with Chemours. The advance payment was recorded as deferred liability included in other accrued liabilities of
the
Consolidated Balance Sheets and approximately $58 remains outstanding as of December 31, 2016.
The Chemours Company
For the years ended December 31, 2015 and 2014: For the year ended December 31, 2015 compared to the year ended
December 31, 2014, other income, net increased by $35 million. This change is comprised of a $42 million gain on foreign exchange
forward contracts, lower foreign currency exchange losses of approximately $23 million driven by the continued strengthening of the
U.S. dollar versus the Mexican peso, the Euro and other currencies, and additional technology and licensing income of approximately
$11 million. These increases were offset by a loss on sale of assets and businesses of $9 million in 2015 compared to the gain of $40
million recognized in 2014.
Refer to Note 8 to the Consolidated Financial Statements for details of “Other income, net”.
Provision for (benefit from) income taxes
For the years ended December 31, 2016 and 2015: For the years ended December 31, 2016 and 2015, Chemours recorded a tax
benefit of $18 million with an effective income tax rate of 164% and $98 million with an effective tax rate of approximately 52%,
respectively. The $80 million decrease in tax benefit and the corresponding change in the effective income tax rate were primarily due to
a $50 million valuation allowance recorded on U.S. foreign tax credits, the Company’s geographical mix of earnings as well as the gain
on the sale of assets and business, which resulted in tax expense and a corresponding change in the effective income tax rate for the
year ended December 31, 2016 as compared to the same period in 2015; offset by the tax benefit on the $335 million PFOA MDL
Settlement accrual (see Note 20 to the Consolidated Financial Statements for further information).
For the years ended December 31, 2015 and 2014: For the year ended December 31, 2015, Chemours recorded a tax benefit of
$98 million with an effective income tax rate of approximately 52%. For the year ended December 31, 2014, Chemours recorded a tax
provision of $149 million with an effective tax rate of approximately 27%. The $247 million decrease in the tax provision was related to
the $738 million decrease in income before income taxes. This decrease in income before income taxes was primarily due to continued
pressure on TiO2 prices, soft demand conditions for certain fluoropolymers products, and restructuring and asset impairment charges.
Although the earnings in our foreign operations remained consistent for the years ended December 31, 2015 and 2014, the earnings in
the U.S. were impacted by the aforementioned factors. The mix of geographical earnings resulted in the effective tax rates varying
between 2015 and 2014.
Segment Reviews
The following table represents Chemours’ total consolidated Adjusted EBITDA by segment:
(Dollars in millions)
Titanium Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fluoroproducts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chemical Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and Other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
$
$
Year Ended December 31,
2015
2014
2016
466
445
39
(128)
822
$
$
326
300
29
(82)
573
$
$
723
282
17
(146)
876
Corporate costs and certain legal and environmental expenses that are not allocated to the segments and foreign exchange gains and
losses are reflected in Corporate and Other.
Adjusted EBITDA represents our primary measure of segment performance and is defined as income (loss) before income taxes
excluding the following:
•
•
•
•
•
•
•
interest expense, depreciation and amortization,
non-operating pension and other postretirement employee benefit costs, which represent the component of net periodic
pension costs (income) excluding service component,
exchange losses (gains) included in “other income, net” of the statement of operations,
employee separation, asset-related charges and other charges, net,
asset impairments,
losses (gains) on sale of business or assets, and
other items not considered indicative of our ongoing operational performance and expected to occur infrequently.
F-16
41
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A reconciliation of Adjusted EBITDA to net income (loss) for the years ended December 31, 2016, 2015 and 2014 is included in
Non-GAAP Financial Measures in Item 7 and in Note 24 to the Consolidated Financial Statements.
The Chemours Company
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Titanium Technologies
(Dollars in millions)
Year Ended December 31,
2016
2015
2014
Segment Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2,364
$
2,392
$
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
466
20%
326
14%
2,937
723
25%
Change in segment net sales from prior period
Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Portfolio/Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2016
2015
(3)%
2%
—%
—%
(1)%
(12)%
(2)%
(5)%
—%
(19)%
2016 versus 2015: Net sales decreased by $28 million or 1% for the year ended December 31, 2016 compared with the same period
in 2015. The decrease in net sales was primarily due to lower average selling prices for TiO2 year over year, partially offset by an
increase in TiO2 sales volume due to higher demand in Europe and the United States. Our sales volume in 2016 was in line with
seasonal and historical trends.
Adjusted EBITDA increased by $140 million or 43% during the year ended December 31, 2016 in comparison with same period in 2015.
The increase in Adjusted EBITDA was primarily driven by productivity improvement initiatives including the impact of the Edge Moor
plant shut-down and global headcount reductions, which increased Adjusted EBITDA by approximately 69%. The productivity
improvement initiatives resulted in lower raw materials and lower plant operating costs. The increase was partially offset by lower
average selling price year-over-year, which decreased adjusted EBITDA by approximately 30%, and higher performance related
compensation accruals.
2015 versus 2014: Net sales decreased by $545 million or 19% for the year ended December 31, 2015 compared with the same
period in 2014, due primarily to lower selling prices and the continued unfavorable effect of foreign currency primarily against the Euro.
Oversupply in the global titanium dioxide industry and weak demand continue to put downward pressure on pricing in all regions.
Adjusted EBITDA decreased by 55% during the year ended December 31, 2015 in comparison with same period in 2014. Adjusted
EBITDA margin also decreased during the year ended December 31, 2015 in comparison with the same period in 2014. The decreases
were primarily driven by lower sales and margin which contributed to an approximately 39% decrease in Adjusted EBITDA due to lower
prices, and unfavorable effects of foreign currency which contributed to an approximately 19% decrease in Adjusted EBITDA. Partially
offsetting these decreases were productivity improvement initiatives, which resulted in lower raw materials, energy and plant operating
costs, as well as the impact of our cost reduction programs, which included certain Titanium Technology plant shut-downs and global
headcount reductions.
Fluoroproducts
(Dollars in millions)
Year Ended December 31,
2016
2015
2014
Recently Adopted Accounting Guidance
Segment Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2,264
$
2,230
$
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
445
20%
300
13%
2,327
282
12%
42
F-15
The Company’s project plan includes a three-phase approach to implementing this standard update. Phase one, the assessment phase,
is currently in process and is expected to be completed in the second quarter of 2017. In connection with this initial phase, the
Company is currently performing the following activities: conducting internal surveys of
its businesses to initially identify a set of
applicable revenue recognition changes related to the new standard update, holding revenue recognition workshops with sales and
business unit finance leadership highlighting the impacts of the new standard update, and reviewing a representative sample of revenue
arrangements across all businesses to assess and validate the impact of the new guidance. Once completed, the Company will pursue
the second phase of the project, where the objectives will be to establish and document key accounting policies, assess disclosure,
business process and control impacts, and determine an initial quantitative impact resulting from the new standard update. Lastly, phase
three’s objectives will comprise of effectively implementing the new standard update and embedding the new accounting treatment into
the Company’s business processes and controls to support the financial reporting requirements.
The Company is still evaluating the impact that the new standard update will have on the Company’s consolidated financial statements
and will be unable to quantify its impact until the third phase of the project has been completed. The method of adoption has not yet
been determined and is also not expected to be finalized until the third phase of the project plan has been completed.
In January 2017, the FASB issued ASU No. 2017-04, “Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill
Impairment”, which eliminates the requirement to determine the fair value of
individual assets and liabilities of a reporting unit to
measure goodwill impairment. Under the amendments, goodwill impairment testing will be performed by comparing the fair value of the
reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the
reporting unit’s fair value, but not to exceed the total amount of goodwill allocated to the reporting unit. The guidance is effective for
annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and should be applied on a prospective
basis. Early adoption is permitted for annual or interim goodwill impairment testing performed after January 1, 2017. The Company
plans to adopt this guidance in 2017.
In August 2016, the FASB issued various updates to the Accounting Standards Update (ASU) 2016-15, “Statement of Cash Flows
(Topic 230): Classification of Certain Cash Receipts and Cash Payments”, which clarifies and amends certain cash receipts and cash
payments presentation and classification in the statement of cash flows. The guidance is effective for public business entities for fiscal
years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments should be applied using a
retrospective transition method (unless impractical to do so) to each period presented and earlier application is permitted. Chemours is
currently evaluating the impact of adopting this guidance but does not expect the adoption will have a significant impact on its cash
flows.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which supersedes the leases requirements in Topic 840.
The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases in accordance with
FASB Concepts Statement No. 6, Elements of Financial Statements, and, therefore, recognition of
those lease assets and lease
liabilities represents an improvement over previous GAAP, which did not require lease assets and lease liabilities to be recognized for
most
leases. A qualitative disclosure along with specific quantitative disclosures is required to provide enough information to
supplement the amounts recorded in the financial statements so that users can understand more about the nature of an entity’s leasing
activities. Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a
modified retrospective approach, which includes a number of optional practical expedients that entities may elect to apply. The
amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal
years. Early application of the amendments in this update is permitted for all entities. Chemours is currently evaluating the impact of
adopting this guidance on its financial position, results of operations and debt covenants.
In March 2016, the FASB issued ASU No. 2016-09, “Compensation — Stock Compensation (Topic 718)”. The update sets forth areas
for simplification within several aspects of
the accounting for shared-based payment
transactions,
including the income tax
consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments
in this update are effective for fiscal periods, and interim periods within those fiscal years, beginning after December 15, 2016.
Chemours adopted this guidance effective January 1, 2017 and the adoption did not have a significant impact on the Company’s
financial position, results of operations and of cash flows.
In April 2015, the FASB issued ASU No. 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement”, which
provides guidance about whether a cloud computing arrangement includes a software license. The customer should account for the
software license element of
the arrangement consistent with the acquisition of other software licenses. If
the cloud computing
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
at historical exchange rates. Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets
and liabilities are included in other income, net in the period in which they occur.
For foreign entities where the local currency is the functional currency, assets and liabilities denominated in local currencies are
translated into U.S. dollars at end-of-period exchange rates and the resulting translation adjustments are reported as a component of
accumulated other comprehensive (loss) income in equity. Assets and liabilities denominated in other than the functional currency are
remeasured into the functional currency prior to translation into U.S. dollars and the resulting exchange gains or losses are included in
income in the period in which they occur. Income and expenses are translated into U.S. dollars at average exchange rates in effect
Beginning in 2015, when the Chemours operations were legally and operationally separated within DuPont in anticipation of
the
separation, certain of Chemours foreign entities set their local currency as the functional currency.
during the period.
Derivatives
Chemours enters into forward currency exchange contracts to minimize volatility in earnings related to the foreign exchange gains and
losses resulting from remeasuring net monetary assets that Chemours holds which are denominated in non-functional currencies.
Chemours does not hold or issue financial instruments for speculative or trading purposes. The derivative assets and liabilities are
reported on a gross basis in the Consolidated Balance Sheets. All gains and losses resulting from the revaluation of the derivative
assets and liabilities are recognized in other income, net in the Consolidated Statements of Operations during the period in which they
occurred. Please refer to Note 21 for additional information.
Fair Value Measurement
Under the accounting for fair value measurements and disclosures, a fair value hierarchy was established that prioritizes the inputs to
valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets
for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). A
financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value
measurement.
Chemours uses the following valuation techniques to measure fair value for its assets and liabilities:
(a) Level 1 — Quoted market prices in active markets for identical assets and liabilities;
(b) Level 2 — Significant other observable inputs (e.g. quoted prices for similar items in active markets, quoted prices for identical
or similar items in markets that are not active, inputs other than quoted prices that are observable, such as interest rate and
yield curves, and market-corroborated inputs); and
(c) Level 3 — Unobservable inputs for the asset or liability, which are valued based on management’s estimates of assumptions
that market participants would use in pricing the asset or liability.
Recent Accounting Pronouncements
Accounting Guidance Issued Not Yet Adopted
In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, “Revenue from Contracts with Customers
(Topic 606).” The objective of this standard update is to remove inconsistent practices with regard to revenue recognition between US
GAAP and IFRS. The standard intends to improve comparability of revenue recognition practices across entities, industries, jurisdictions
and capital markets. The provisions of ASU No. 2014-09 will be effective for interim and annual periods beginning after December 15,
2017, with early adoption permitted for annual periods beginning after December 15, 2016. The Company plans to adopt ASU 2014-09
as of January 1, 2018. Subsequent to the issuance of ASU No. 2014-09, the FASB has issued multiple updates in connection with
Topic 606. These updates affect the guidance contained within ASU 2014-09 and will be assessed as part of the Company’s revenue
recognition project plan.
The Chemours Company
Change in segment net sales from prior period
Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Portfolio/Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2016
2015
(1)%
4%
(1)%
(1)%
1%
2%
—%
(4)%
(2)%
(4)%
2016 versus 2015: Net sales increased $34 million or 2% for the year ended December 31, 2016 compared with the same period in
2015. Stronger demand for Opteon™ refrigerant in both Europe and the United States delivered a significant increase in volume over
the prior year, partially offset by lower volume over the prior year due to the phase down of HCFCs refrigerants (i.e., Freon™) as
stipulated by the Montreal Protocol and by lower selling prices for fluoropolymer products due to competitive pricing pressure. For the
year ended December 31, 2016, unfavorable foreign currency impact, primarily against the Euro, Brazilian real and Mexican peso
resulted in an overall decrease in net sales.
Adjusted EBITDA increased by $145 million or 48% for the year ended December 31, 2016 in comparison with same periods in 2015,
due primarily to margin improvements and cost reductions from cost savings initiatives. Margin improvement from fluorochemicals sales,
including growth in Opteon™ but excluding currency impact, contributed an increase of approximately 41% in the year ended
December 31, 2016, and other cost reduction initiatives contributed an increase of approximately 20% for the year ended December 31,
2016. In addition, we incurred approximately $22 million or approximately 7% of costs in 2015 due to plant outages in certain of our
manufacturing facilities in the United States that did not recur in 2016. These improvements were partially offset by lower selling price
and unfavorable product mix of fluoropolymers, and higher performance related compensation accruals. Overall unfavorable currency in
the year ended December 31, 2016 also resulted in a decrease in adjusted EBITDA by approximately 6%.
2015 versus 2014: Net sales decreased by $97 million or 4% for the year ended December 31, 2015 compared with the same period
in 2014. Net sales were unfavorably impacted by foreign currency exchange rates, primarily related to the Euro, Brazilian real, and
Japanese yen, and continued weaker demand for industrial resins. Favorable product mix with strong Opteon™ refrigerant adoption
delivered increased prices and steady overall volumes over the prior year.
Adjusted EBITDA and adjusted EBITDA margin increased during the year ended December 31, 2015 in comparison with the same
periods in 2014. Both increases were primarily due to product mix and cost reduction efforts including global headcount reductions
during the second half of 2015.
Chemical Solutions
(Dollars in millions)
Year Ended December 31,
2016
2015
2014
Segment Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
772
$
1,095
$
1,168
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39
5%
29
3%
17
1%
Change in segment net sales from prior period
Year Ended December 31,
2016
2015
Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Portfolio/Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7)%
(3)%
—%
(19)%
(29)%
(5)%
2%
(3)%
—%
(6)%
2016 versus 2015: Net sales decreased by $323 million or 29% for the year ended December 31, 2016 compared with the same
period in 2015. These decreases were due to a portfolio change resulting from the sale of our aniline facility in Beaumont, Texas, our
C&D business and our Sulfur business, and the impact of RMS plant shutdown in September 2016. In addition, sales decreased due to
lower selling prices resulting from the impact of lower raw materials costs on contractual pass-through terms, and lower sales volume
substantially across all business units during the year except Sulfur.
F-14
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The Chemours Company
Adjusted EBITDA and Adjusted EBITDA margin increased during the year ended December 31, 2016 in comparison with same period in
2015. Despite the decreases in net sales, Adjusted EBITDA and Adjusted EBITDA margin increased due primarily to the cost reduction
efforts, including the global headcount reductions implemented in 2015, and improvement in plant operating costs.
2015 versus 2014: Net sales decreased by $73 million or 6%, for the year ended December 31, 2015 compared with the same period
in 2014, primarily due to lower prices based on contractual pass-through terms, changes in the mix of products sold as well as the
unfavorable impact of foreign currency exchange rates including the Mexican peso, Canadian dollar and the Euro. These decreases
were partially offset by volume increases in cyanide and sulfur due to strong demand.
Adjusted EBITDA and Adjusted EBITDA margin increased during the year ended December 31, 2015 in comparison with same period in
2014. The slight increase in Adjusted EBITDA was driven primarily by lower R&D expense and cost reduction efforts, including the
global headcount reductions, during the second half of 2015.
2017 Outlook
With our transformation plan on track, we are targeting an additional $150 million of structural costs reductions in 2017. These cost
savings are expected to be generated from a combination of actions taken during 2016, including facilities closures, headcount
reductions, and procurement and productivity enhancements, and additional actions that may be taken in 2017. Based on our
anticipated cost reduction and growth initiatives, we continue to expect cost savings of approximately $350 million and approximately
$150 million in improvements from growth initiatives that together will also improve our pre-tax earnings by similar amounts through
2017 over 2015. These improvements will be partially offset by the impact of divestitures completed during 2016, unfavorable price and
mix of fluoropolymer products, and may also be impacted by market factors.
for TiO2, and the benefits of our newest
For 2017, we believe that those cost reductions from our transformation plan, along with growth from Opteon™, an improving pricing
environment
line at our Altamira facility will be partially offset by headwinds in our
Fluoroproducts segment and EBITDA lost
from divestitures. Therefore, we expect our Adjusted EBITDA to be in line with our
transformation plan goals. We expect our capital expenditures to be at approximately $450 million driven in large part by expenditures
associated with our new Opteon™ plant under construction in Corpus Christi and our anticipated Mining Solutions expansion. Our
outlook reflects our current visibility and expectations on market factors, such as currency movements, TiO2 pricing and end-market
demand.
Liquidity and Capital Resources
Prior to the separation on July 1, 2015, transfers of cash to and from DuPont’s cash management system were reflected in DuPont
Company Net Investment in the historical Consolidated Balance Sheets, Statements of Cash Flows and Statements of Changes in
DuPont Company Net Investment. DuPont funded our cash needs through the date of the separation. Chemours has a historical pattern
of seasonality, with working capital use of cash in the first half of the year, and a working capital source of cash in the second half of
the year.
Chemours’ primary source of
liquidity is cash generated from operations, available cash and borrowings under the debt financing
arrangements as described below. We believe these sources are sufficient to fund our planned operations and to meet our interest,
dividend and contractual obligations. Our financial policy seeks to deleverage by using free cash flow to repay outstanding borrowings,
selectively invest for growth to enhance our portfolio including certain strategic capital investments, and return cash to shareholders
through dividend payments.
Chemours’ operating cash flow generation is driven by, among other things, global economic conditions generally and the resulting
impact on demand for our products, raw material and energy prices, and industry-specific issues, such as production capacity and
utilization. Chemours has generated strong operating cash flow through various industry and economic cycles evidencing the operating
strength of our businesses. Over the industry cycles in recent years, cash flows from operating activities increased in years leading up
to the historical peak profitability achieved in 2011, and have decreased annually since that time. Despite the challenging market
conditions in the TiO2 industry since the historical peak, we anticipate that through our cost reduction efforts and growth initiatives, our
operations will provide sufficient liquidity to implement the transformation plan and support cash needs for the business.
While we were a wholly-owned subsidiary of DuPont, our then-board of directors, consisting of DuPont employees, declared a
dividend of an aggregate amount of $100 million for the third quarter of 2015, which was paid on September 11, 2015 to our
stockholders of record as of August 3, 2015. On September 1, 2015, our independent board of directors declared a dividend of $0.03
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
combination of insurance and self-insurance is used, reflecting comprehensive reviews of relevant risks. The annual cost was allocated
to all of the participating businesses using methodologies deemed reasonable by management. All obligations pursuant to these plans
have historically been obligations of DuPont. As such, these obligations were not included in the Consolidated Balance Sheets, with the
exception of self-insurance liabilities related to workers compensation, vehicle liability and employee related benefits.
Defined Benefit Plans
We have defined benefit plans covering certain of our employees outside the U.S., which are generally required by local regulations.
The benefits, which primarily relate to pension, are accrued over the employees’ service periods. We use actuarial methods and
assumptions in the valuation of defined benefit obligations and the determination of net periodic pension income or expense.
Differences between actual and expected results or changes in the value of defined benefit obligations and plan assets, if any, are not
recognized in earnings as they occur but rather systematically over subsequent periods.
Stock-based Compensation
Chemours’ stock-based compensation consists of stock options, restricted share units (RSUs) and performance share units (PSUs) to
employees and non-employee directors. Stock options are measured at fair value on the grant date or date of modification, as
applicable. We recognize compensation expense on a straight-line basis over the requisite service period. The number of awards
ultimately expected to vest is determined by use of an estimated forfeiture rate. The estimated forfeiture rate is based on historical data
for the employee group awarded options and expected employee turnover rates, which management reevaluates each period.
Income Taxes
The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this
approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities
are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus the change in
deferred taxes during the year. Deferred taxes result from differences between the financial and tax basis of Chemours’ assets and
liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to
reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.
Chemours recognizes income tax positions that meet the more likely than not threshold and accrues interest related to unrecognized
income tax positions, which is included in other income, net in our Consolidated Statements of Operations. Income tax related penalties
are included in the provision for income taxes.
Chemours does not provide for income taxes on undistributed earnings of all foreign subsidiaries that are intended to be indefinitely
reinvested.
Prior to separation, income taxes presented attributed current and deferred income taxes of DuPont to Chemours’ stand-alone financial
statements in a manner that is systematic, rational, and consistent with the asset and liability method prescribed by ASC 740, Income
Taxes (ASC 740). Accordingly, Chemours’ income tax provision was prepared following the separate return method. The separate return
method applies ASC 740 to the stand-alone financial statements of each member of the consolidated group as if the group member
were a separate taxpayer and a stand-alone enterprise.
Foreign Currency Translation
Chemours identifies its separate and distinct foreign entities and groups them into two categories: (1) extensions of the parent (U.S.
dollar functional currency) and (2) self-contained (local functional currency). If a foreign entity does not align with either category,
factors are evaluated and a judgment is made to determine the functional currency. Chemours changes the functional currency of its
separate and distinct foreign entities only when significant changes in economic facts and circumstances indicate clearly that the
functional currency has changed.
During the periods covered by the consolidated financial statements, part of the Chemours business operated within foreign entities.
For foreign entities where the U.S. dollar is the functional currency, all foreign currency-denominated asset and liability amounts are
remeasured into U.S. dollars at end-of-period exchange rates, except for inventories; prepaid expenses; property, plant and equipment;
goodwill and other intangible assets, which are remeasured at historical rates. Foreign currency-denominated income and expenses are
remeasured at average exchange rates in effect during the period, except for expenses related to balance sheet amounts remeasured
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Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
disposal. Long-lived assets to be disposed of by sale are classified as held for sale and are reported at the lower of carrying amount or
fair market value less cost to sell. Depreciation is discontinued for long-lived assets classified as held for sale.
Research and Development
Research and development costs are expensed as incurred. Research and development expenses include costs (primarily consisting of
employee costs, materials, contract services, research agreements, and other external spend) relating to the discovery and
development of new products, enhancement of existing products and regulatory approval of new and existing products.
Environmental Liabilities and Expenditures
Chemours accrues for remediation activities when it is probable that a liability has been incurred and a reasonable estimate of the
liability can be made. Where the available information is sufficient to estimate the amount of liability, that estimate has been used.
Where the information is only sufficient to establish a range of probable liability and no point within the range is more likely than any
other, the lower end of
the range has been used. Estimated liabilities are determined based upon existing remediation laws and
technologies.
Inherent uncertainties exist
in such evaluations primarily due to unknown environmental conditions, changing
governmental regulations and legal standards regarding liability, and emerging remediation technologies. These accruals are adjusted
periodically as remediation efforts progress and as additional technology, regulatory and legal information become available.
Environmental liabilities and expenditures included claims for matters that are liabilities of DuPont and its subsidiaries, that Chemours
may be required to indemnify pursuant to the separation-related agreements executed prior to the separation. Accrued liabilities are
undiscounted and do not include claims against third parties. These liabilities are included in “Other accrued liabilities” and “Other
liabilities” in the Consolidated Balance Sheet.
The Chemours Company
per share, which was paid on December 14, 2015 to our stockholders of record on November 13, 2015. During 2016, our board of
directors also declared quarterly dividends of $0.03 per share, which were paid in each quarter during the year.
The separation agreements set forth a process to true-up cash and working capital transferred to us from DuPont at separation. In
January 2016, Chemours and DuPont entered into an agreement, contingent upon the credit agreement amendment described herein,
which provided for the extinguishment of payment obligations of cash and working capital true-ups previously contemplated in the
separation agreements. As a result, Chemours was not required to make any payments to DuPont, nor did DuPont make any payments
to Chemours related to the separation true-up mechanism. In addition, the agreement set forth an advance payment of approximately
$190 million, which was paid to Chemours in February 2016, for certain specified goods and services that Chemours expects to provide
to DuPont through mid-2017 under existing agreements with Chemours. Approximately $58 million of the prepayment amount remained
outstanding as of December 31, 2016.
Over the next 12 months, Chemours expects to have significant interest, capital expenditure and restructuring payments. We expect to
fund these payments through cash generated from operations, available cash and borrowings under the revolving credit facility. We
anticipate that our operations and debt financing arrangements will provide sufficient liquidity over the next 12 months. The availability
under our Revolving Credit Facility is subject to the last 12 months of our consolidated EBITDA as defined under the credit agreement.
As of December 31, 2016 and 2015, we had $678 million and $271 million, respectively, of cash and cash equivalents on our balance
sheet held by our foreign subsidiaries, all of which is readily convertible into currencies used in our operations, including the U.S. dollar.
Cash and earnings of our foreign subsidiaries are generally used to finance their operations and capital expenditures. At December 31,
2016 and 2015, management believed that sufficient liquidity was available in the United States, and it is our intention to indefinitely
reinvest undistributed earnings of our foreign subsidiaries outside of the United States. No deferred tax liabilities have been recognized
with regard to the approximately $678 million and $271 million of cash of our foreign subsidiaries as of December 31, 2016 and 2015,
respectively, and undistributed earnings. The potential tax implications of the repatriation of unremitted earnings are driven by facts at
the time of distribution, therefore, it is not practicable to estimate the income tax liabilities that might be incurred if such cash and
earnings were repatriated to the United States.
Costs related to environmental remediation are charged to expense in the period incurred, in “Cost of goods sold” of the Consolidated
Statement of Operations. Other environmental costs are also charged to expense in the period incurred, unless they increase the value
Cash Flow
of the property or reduce or prevent contamination from future operations, in which case they are capitalized and amortized.
Asset Retirement Obligations
Chemours records asset retirement obligations at fair value at the time the liability is incurred. Fair value is measured using expected
future cash outflows discounted at Chemours’ credit-adjusted risk-free interest rate, which are considered level 3 inputs. Accretion
expense is recognized as an operating expense classified within cost of goods sold on the Consolidated Income Statements using the
credit-adjusted risk-free interest rate in effect when the liability was recognized. The associated asset retirement obligations are
capitalized as part of the carrying amount of the long-lived asset and depreciated over the estimated remaining useful life of the asset,
generally for periods ranging from two to 25 years.
Chemours accrues for litigation matters when it is probable that a liability has been incurred and the amount of the liability can be
reasonably estimated. Litigation liabilities and expenditures included in the consolidated financial statements represent litigation matters
that are liabilities of DuPont and its subsidiaries, that Chemours may be required to indemnify pursuant to the separation-related
agreements executed prior to the separation. Legal costs such as outside counsel fees and expenses are charged to expense in the
Litigation
period services are received.
Insurance
Chemours insures certain risks where permitted by law or regulation, including workers’ compensation, vehicle liability and employee
related benefits. Liabilities associated with these risks are estimated in part by considering historical claims experience, demographic
factors and other actuarial assumptions. For other risks, the Company uses a combination of insurance and self-insurance, reflecting
comprehensive reviews of relevant risks. A receivable for an insurance recovery is generally recognized when the loss has occurred
and collection is considered probable.
Prior to the separation, Chemours was a participant
in DuPont’s self-insurance program where permitted by law or regulation,
including workers’ compensation, vehicle liability and employee related benefits. Liabilities associated with these risks are estimated
in part by considering historical claims experience, demographic factors, and other actuarial assumptions. For other risks, a
The following table sets forth a summary of the net cash provided by (used for) operating, investing and financing activities.
(Dollars in millions)
Cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . .
Cash provided by (used for) investing activities . . . . . . . . . . . . . . . . . .
Cash (used for) provided by financing activities . . . . . . . . . . . . . . . . . .
$
Year Ended December 31,
2016
2015
2014
$
594
357
(396)
$
182
(497)
687
505
(560)
55
Cash Provided by Operating Activities
Cash provided by operating activities improved by $412 million for the year ended December 31, 2016 compared to the same period in
improvements in the results of operations and working capital. In addition, we received an advance
2015, due primarily to overall
payment of $190 million from DuPont in February 2016 of which approximately $132 million was utilized during the year ended
December 31, 2016. Partially offsetting these increases are interest payments in 2016 of approximately $220 million versus
approximately $122 million in 2015, and restructuring payments of approximately $68 million in 2016 versus $39 million in 2015.
Cash provided by operating activities decreased by $323 million for the year ended December 31, 2015 compared with the same period
in 2014, due to lower earnings than the prior year, payments on restructuring activities and interest payments on our 2015 financing
transactions.
Cash Provided by (Used for) Investing Activities
Cash provided by investing activities the year ended December 31, 2016 includes the $140 million proceeds from the sale of our
aniline facility in Beaumont, Texas, $321 million net proceeds from the sale of the Sulfur business and $223 million net proceeds from
the sale of
the C&D business (see Note 7 to the Consolidated Financial Statements for additional details), as well as $22 million
proceeds from a sale of land in Repauno, New Jersey. These cash inflows were offset by capital expenditures during the period of
$338 million. Our capital expenditures decreased by approximately $181 million when compared to the same period in 2015 due to
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The Chemours Company
lower spending primarily from the completion of our Altamira plant expansion in April 2016 and no separation-related expenditures
incurred during 2016.
Cash used for investing activities decreased $63 million for the year ended December 31, 2015 compared to the same period in 2014
primarily as a result of a $85 million decrease in capital expenditures of which $80 million relates to the expansion of Titanium
Technologies’ Altamira plant in Mexico and approximately $50 million from other on-going and expansion activities, partially offset by
increase in separation-related capital expenditures of $45 million. In addition, we realized approximately $42 million of net gain from
foreign exchange contract settlements entered into in 2015 after the separation and no similar realized gains or losses were incurred
prior to the separation. The decreases in cash used for investing activities are partially offset by incremental investments made to our
unconsolidated affiliate in China and lower sales proceeds due to lesser business and asset sale activities during 2015.
Cash (Used for) Provided by Financing Activities
During 2016, utilizing our available cash, we repurchased and repaid a portion of our senior secured term loans with an aggregate
principal amount of $105 million for $104 million in cash, a portion of our 2023 Notes with an aggregate principal amount of $192
million for $182 million in cash, and a portion of our Euro Notes with an aggregate principal amount of $73 million for $68 million in
cash. These senior loan repurchases were in addition to our quarterly required repayments on the senior secured term loans equivalent
to 1% per annum of
its original principal. We also declared and paid approximately $22 million of dividends to our shareholders,
equivalent to $0.12 per share.
uncollectible.
Inventories
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Receivables and Allowance for Doubtful Accounts
Receivables are recognized net of an allowance for doubtful accounts. The allowance for doubtful accounts reflects the best estimate of
losses inherent in Chemours’ accounts receivable portfolio determined on the basis of historical experience, specific allowances for
known troubled accounts and other available evidence. Accounts receivable are written off when management determines that they are
Chemours’ inventories are valued at the lower of cost or market. Inventories held at substantially all U.S. locations are valued using the
last-in, first-out (LIFO) method. Inventories held outside the U.S. are determined by the average cost method. Elements of cost in
inventories include raw materials, direct labor, and manufacturing overhead. Stores and supplies are valued at cost or market, whichever
is lower; cost is generally determined by the average cost method. Approximately 48% and 54% of inventory is on a LIFO basis as of
December 31, 2016 and 2015, respectively. The remainder is accounted for using the average cost method.
Property, Plant and Equipment
Cash provided by financing activities increased by $632 million for the year ended December 31, 2015 compared to the same period in
2014, due primarily from the proceeds from our financing transactions offset by the net transfers to DuPont in connection with the
separation. Through June 30, 2015, DuPont managed Chemours’ cash and financing arrangements and all excess cash generated
through earnings was deemed remitted to DuPont and all sources of cash were deemed funded by DuPont. Prior to the separation on
July 1, 2015, Chemours remitted approximately $3.4 billion to DuPont in the form of a dividend, using cash received from issuance of
debt. See Note 4 to the Consolidated Financial Statements for additional information.
Property, plant and equipment is carried at cost and is depreciated using the straight-line method. Property, plant and equipment placed
in service prior to 1995 is depreciated under the sum-of-the-years’ digits method or other substantially similar methods. Substantially all
equipment and buildings are depreciated over useful lives ranging from 15 to 25 years. Capitalizable costs associated with computer
software for internal use are amortized on a straight-line basis over five to seven years. When assets are surrendered, retired, sold or
otherwise disposed of, their gross carrying values and related accumulated depreciation are removed from the balance sheet and
included in determining gain or loss on such disposals.
Current Assets
(Dollars in millions)
December 31,
2016
December 31,
2015
“Other assets”.
Repair and maintenance costs that materially add to the value of the asset or prolong its useful life are capitalized and depreciated
based on the extension to the useful life. Capitalized repair and maintenance costs are recorded on the Consolidated Balance Sheets in
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Accounts and notes receivable – trade, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
902
807
767
77
366
859
972
104
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2,553
$
2,301
Accounts and notes receivable — trade, net at December 31, 2016 decreased by $52 million compared to December 31, 2015 primarily
due to lower sales in the fourth quarter of 2016 over fourth quarter of 2015, including impact of divested businesses, $22 million of
accounts receivable disposed in connection with the sale of C&D and Sulfur businesses, and unfavorable currency translation of
approximately $2 million.
Inventories at December 31, 2016 decreased $205 million compared to December 31, 2015. The decrease was due to the continued
effort to reduce inventory on hand as well as due to the lower raw material and production costs. In addition, we recorded approximately
$10 million of inventory write-down in the Chemical Solutions segment during 2016 as a result of the previously announced RMS
restructuring, and approximately $17 million of inventory disposed in connection with the sale of our aniline facility in Beaumont, Texas,
sale of C&D and Sulfur businesses, and approximately $23 million of unfavorable currency translation.
Prepaid expenses and other current assets at December 31, 2016 decreased compared to December 31, 2015 due to the sale of our
aniline facility in Beaumont, Texas in February 2016, which was previously classified as assets held-for-sale for approximately $46
million and included in this account as of December 31, 2015.
Goodwill and Other Intangible Assets
The excess of the purchase price over the estimated fair value of the net assets acquired, including identified intangibles, in a business
combination is recorded as goodwill. Goodwill is tested for impairment annually on October 1; however, these tests are performed more
frequently when events or changes in circumstances indicate that the asset may be impaired. Goodwill is evaluated for impairment at
the reporting unit level, which is defined as one level below operating segment except for Titanium Technologies, which is both an
operating segment and a reporting unit. A reporting unit is the level at which discrete financial information is available and reviewed by
business management on a regular basis. The Company utilizes an income approach (or discounted cash flow method) and market
approach to calculate the fair value of its reporting units.
Definite-lived intangible assets, such as purchased and licensed technology, patents, trademarks, and customer lists are amortized over
their estimated useful lives, generally for periods ranging from five to 20 years. The reasonableness of the useful lives of these assets is
continually evaluated.
Impairment of Long-Lived Assets
Chemours evaluates the carrying value of long-lived assets to be held and used when events or changes in circumstances indicate the
carrying value may not be recoverable. For purposes of recognition or measurement of an impairment loss, the assessment is
performed on the asset or asset group at the lowest level for which identifiable cash flows are largely independent of the cash flows of
other groups of assets and liabilities. To determine the level at which the assessment is performed, Chemours considers factors such
as revenue dependency, shared costs and the extent of vertical integration.
The carrying value of a long-lived asset is considered impaired when the total projected undiscounted cash flows from the use and
eventual disposition of an asset or asset group are separately identifiable and are less than its carrying value. In that event, a loss is
recognized based on the amount by which the carrying value exceeds the fair value of
the long-lived asset. The fair value
methodology used is an estimate of fair market value which is made based on prices of similar assets or other valuation methodologies
including present value techniques. Long-lived assets to be disposed of other than by sale are classified as held for use until their
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Current Liabilities
The Chemours Company
The net transfers from DuPont on the Consolidated Statements of Stockholders’ Equity include a non-cash contribution from DuPont of
$109 for the year ended December 31, 2015. This non-cash contribution occurred during physical separation activities at shared
production facilities in the U.S. prior to the separation and certain assets identified at separation. It was determined that assets
previously managed by other DuPont businesses would be transferred to and managed by Chemours.
Comprehensive income as of December 31, 2016 includes an out of period adjustment of $31 million relating to 2015 cumulative
translation adjustments with corresponding adjustment to other current assets. This adjustment is not material to the Company’s
consolidated financial statements taken as a whole.
Note 3. Summary of Significant Accounting Policies
These consolidated financial statements have been prepared in accordance with GAAP. The significant accounting policies described
below, together with the other notes that follow, are an integral part of the consolidated financial statements.
Preparation of Financial Statements
The preparation of
the consolidated financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and expenses, including allocations of costs as discussed
above, during the reporting period. Management’s estimates are based on historical experience, facts and circumstances available at
the time and various other assumptions that we believe are reasonable. Actual results could differ from those estimates.
Principles of Consolidation and Combination
The consolidated financial statements include the accounts Chemours and its subsidiaries, and entities in which a controlling interest is
maintained. For those consolidated subsidiaries in which the Company’s ownership is less than 100%, the outside shareholders’
interests are shown as noncontrolling interests. Investments in companies in which Chemours, directly or indirectly, owns 20% to 50% of
the voting stock or has the ability to exercise significant influence over operating and financial policies of the investee are accounting for
using the equity method of accounting. As a result, Chemours’ share of the earnings or losses of such equity affiliates is included in the
Consolidated Statements of Operations and Chemours’ share of such equity affiliates equity is included in the Consolidated Balance
The financial statements for the periods prior to the separation on July 1, 2015 include the combined assets, liabilities, revenues, and
expenses of Chemours. We eliminated all
intercompany accounts and transactions in the preparation of
the accompanying
Sheets.
consolidated financial statements.
Revenue Recognition
Revenue is recognized when the earnings process is complete. Revenue for product sales is recognized when products are shipped to
the customer in accordance with the terms of
the agreement, when title and risk of
loss have been transferred, collectability is
reasonably assured and pricing is fixed or determinable. Revenue associated with advance payments are recorded as deferred revenue
and are recognized as shipments are made and title, ownership and risk of loss pass to the customer. Accruals are made for sales
returns and other allowances based on historical experience. Cash sales incentives are accounted for as a reduction in sales and
noncash sales incentives are recorded as a charge to cost of goods sold at the time the revenue or selling expense, depending on the
nature of the incentive, is recorded. Amounts billed to customers for shipping and handling fees are included in net sales and costs
incurred by Chemours for the delivery of goods are classified as cost of goods sold in the Consolidated Statements of Operations.
Taxes on revenue-producing transactions are excluded from net sales. Licensing and royalty income is recognized in accordance with
agreed upon terms, when performance obligations are satisfied, the amount is fixed or determinable and collectability is reasonably
Cash and Cash Equivalents
assured.
less.
Cash and cash equivalents generally include cash, time deposits or highly liquid investments with original maturities of three months or
(Dollars in millions)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings and current portion of long-term debt . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2016
December 31,
2015
$
$
884
15
872
1,771
$
$
973
39
454
1,466
Accounts payable decreased by $89 million compared to December 31, 2015 due to lower inventories and timing of payments to
vendors, as well as impact of divested businesses and favorable currency translation of approximately $20 million.
Other accrued liabilities increased primarily due to a $335 million litigation accrual related to the PFOA MDL Settlement. In addition, we
received advance payment from DuPont in February 2016 and approximately $58 million of this liability remains outstanding as of
December 31, 2016. Also, our performance related compensation accruals increased by approximately $42 million in line with the
improvements in our business results.
Credit Facilities and Notes
On May 12, 2015, Chemours entered into certain financing transactions in connection with the Distribution and in recognition of the
assets contributed to us by DuPont in anticipation of the separation. The proceeds from the financing transactions were used to fund a
cash distribution to DuPont of $3.4 billion and a distribution in kind of Notes with an aggregate principal amount of $507 million. See
Note 19 to the Consolidated Financial Statements for further discussion of these transactions.
The credit agreement provided for a seven-year senior secured term loan (the “Term Loan Facility”) in a principal amount of $1.5 billion
repayable in equal quarterly installments at a rate of one percent of the original principal amount per year, with the balance payable on
the final maturity date. The Term Loan Facility was issued with a $7 million original issue discount and bears interest at a rate of LIBOR
plus 3.00%, with a 0.75% LIBOR floor. The proceeds from the Term Loan Facility were used to fund a portion of the distribution to
DuPont, along with related fees and expenses.
Prior to an amendment in February 2016, the credit agreement also provided for a five-year $1.0 billion senior secured revolving credit
facility (the “Revolving Credit Facility”). In February 2016, an amendment to the Revolving Credit Facility reduced the capacity to $750
million beginning in the first quarter of 2016 and amended certain covenants (see Debt Covenants discussion included herein). The
proceeds of any loans made under the Revolving Credit Facility can be used to finance capital expenditures, acquisitions, working
capital needs and for other general corporate purposes. Availability under the Revolving Credit Facility is subject to certain covenant
limitations. At December 31, 2016, the facility had full borrowing capacity of $750 million, from which we have $132 million letters of
credit issued and outstanding under this facility.
Chemours’ obligations under the Term Loan Facility and Revolving Credit Facility (collectively, the Senior Secured Credit Facilities) are
guaranteed on a senior secured basis by all of
its material domestic subsidiaries, subject to certain agreed upon exceptions. The
obligations under the Senior Secured Credit Facilities are also, subject to certain agreed upon exceptions, secured by a first priority lien
on substantially all of Chemours and its material wholly-owned domestic subsidiaries’ assets, including 100% of the stock of domestic
subsidiaries and 65% of the stock of certain foreign subsidiaries.
Additionally, on May 12, 2015, Chemours issued approximately $2,503 million aggregate principal of senior unsecured notes (the
“Notes”) in a private placement. The 2023 notes (the “2023 Notes”) with an aggregate principal amount of $1,350 million bear
interest at a rate of 6.625% per annum and will mature on May 15, 2023 with all principal paid at maturity. The 2025 notes (the “2025
Notes”) with an aggregate principal amount of $750 million bear interest at a rate of 7.000% per annum and will mature on May 15,
2025 with all principal paid at maturity. The 2023 euro notes (the “Euro Notes”) with an aggregate principal amount of €360 million bear
interest at a rate of 6.125% per annum and will mature on May 15, 2023 with all principal paid at maturity. Interest on the Notes
is payable semi-annually in cash in arrears on May 15 and November 15 of each year, which commenced on November 15, 2015. The
Notes were offered in the U.S. to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the
Securities Act, and outside the U.S. to non-U.S. persons in reliance on Regulation S under the Securities Act. In connection with the
issuance of
the Notes, Chemours entered into a registration rights agreement, in which Chemours agreed to file with the SEC a
registration statement for the exchange of the Notes for new registered notes with identical terms. On March 18, 2016, Chemours
filed a registration statement on Form S-4 with respect to the exchange offer. The registration statement was declared effective on
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149996_85669 Chemours Company Annual Report_Text Signature 5 Side B Magenta
149996_85669 Chemours Company Annual Report_Text Signature 5 Side B RGS 6
149996_85669 Chemours Company Annual Report_Text Signature 5 Side B RGS 5
149996_85669 Chemours Company Annual Report_Text Signature 5 Side B RGS 2
149996_85669 Chemours Company Annual Report_Text Signature 5 Side B RGS 1
149996_85669 Chemours Company Annual Report_Text Signature 5 Side B RGS 4
149996_85669 Chemours Company Annual Report_Text Signature 5 Side B RGS 3
149996_85669 Chemours Company Annual Report_Text Signature 5 Side B Yellow
149996_85669 Chemours Company Annual Report_Text Signature 5 Side B Black
149996_85669 Chemours Company Annual Report_Text Signature 5 Side B Cyan
The Chemours Company
April 12, 2016, and the exchange offer was completed on May 19, 2016. In addition, on May 5, 2016, the Euro Notes were listed for
trading on the Global Exchange Market of the Irish Stock Exchange.
Each series of Notes is or will be fully and unconditionally guaranteed, jointly and severally, by Chemours’ existing and future domestic
subsidiaries that guarantee (the Guarantors) the Senior Secured Credit Facilities or that guarantee other indebtedness of Chemours or
any guarantor in an aggregate principal amount
in excess of $75 million (the Guarantees). The Notes are unsecured and
unsubordinated obligations of Chemours. The Guarantees are unsecured and unsubordinated obligations of the Guarantors. The Notes
rank equally in right of payment to all of Chemours’ existing and future unsecured unsubordinated debt and senior in right of payment to
all of Chemours’ existing and future debt that is by its terms expressly subordinated in right of payment to the Notes. The Notes are
subordinated to indebtedness under the Senior Secured Credit Facilities as well as any future secured debt to the extent of the value of
the assets securing such debt. Chemours’ is obligated to offer to purchase the Notes at a price of (a) 101 percent of their principal
amount, together with accrued and unpaid interest, if any, to the date of purchase, upon the occurrence of certain change of control
events and (b) 100 percent of their principal amount, together with accrued and unpaid interest, if any, to the date of purchase, with the
proceeds from certain asset dispositions. These restrictions and prohibitions are subject to certain qualifications and exceptions set
forth in the Indenture, including without limitation, reinvestment rights with respect to the proceeds of asset dispositions. Chemours is
permitted to redeem some or all of the 2023 Notes and Euro Notes by paying a “make-whole” premium prior to May 15, 2018, and on or
after May 15, 2018 and thereafter at specified redemption prices. Chemours also may redeem some or all of the 2025 Notes on or after
May 15, 2020 at specified redemption prices. Chemours also may redeem some or all of the 2023 Notes and Euro Notes by means
other than a redemption, including tender offer and open market repurchases.
Debt Covenants
Chemours is subject to certain debt covenants that, among other things, limit Chemours and certain of Chemours’ subsidiaries to incur
indebtedness, pay dividends or make other distributions, prepay, redeem or repurchase certain debt, make loans and investments, sell
assets, incur liens, enter into transactions with affiliates and consolidate or merge. These covenants are subject to a number of
exceptions and qualifications set forth in the respective agreements.
In December 2016, we entered into a third amendment to the credit agreement to change certain covenants and allow the Company to
enter into a sale and leaseback transaction for its corporate headquarters building located in Wilmington, Delaware. These transactions
are expected to be completed in the first quarter of 2017, and we expect to receive approximately $32 million proceeds. The
amendment requires us to use the proceeds from the sale to repay a portion of the term loans.
financial covenants that rely on consolidated EBITDA for an additional year, and increased the amount of
In February 2016, we proactively pursued a second amendment to the credit agreement in order to ensure that we would retain
adequate liquidity and sufficient cushion in the event of an unexpected, further significant decline in TiO2 pricing. The second
amendment also provided further flexibility by allowing us to include, on a pro forma basis, future benefits of cost savings initiatives in
the calculation of
the
applicable cost savings benefits that could be utilized in the covenant calculation. In addition, the second amendment replaced the total
net leverage ratio with the senior secured net leverage ratio and modified the minimum required levels of the interest expense coverage
ratio. These changes were designed to allow us to have full access to the revolving credit facility, provide flexibility to execute our
transformation plan through 2017 and provide additional cushion in the event of an unexpected, further significant decline in TiO2
pricing. Furthermore, the amendment reduced the size of the revolving credit facility by $250 million to $750 million. With the on-going
efforts to improve working capital usage as a part of our transformation plan, we believe that $750 million of revolver access will be
sufficient to meet our working capital and other cash needs over the next 12 months.
In September 2015, in connection with the Company’s transformation plan announced in August 2015, we undertook a first amendment
financial
to the credit agreement to allow pro forma inclusion of
covenants that rely on consolidated EBITDA beginning from the quarter ended September 30, 2015. Since the revolver availability in
any quarter is determined by the cushion remaining in the financial maintenance covenants at the end of the previous quarter, this
amendment increased our access to the revolving credit facility.
future benefits from cost savings initiatives in the calculation of
The credit agreement, as amended, contains financial covenants which, solely with respect to the revolving credit facility, require us
not to exceed a maximum senior secured net leverage ratio of 3.50 to 1.00 each quarter through December 31, 2016, 3.00 to 1.00
through June 30, 2017 and further decreasing by 0.25 to 1.00 every subsequent six months to 2.00 to 1.00 by January 1, 2019 and
thereafter. We are also required to maintain a minimum interest coverage ratio of 1.75 to 1.00 each quarter through June 30, 2017 and
further increasing by 0.25 to 1.00 every subsequent six months to 3.00 to 1.00 by January 1, 2019 and thereafter. In addition, the
credit agreement contains customary affirmative and negative covenants that, among other things,
limit or restrict us and our
subsidiaries’ ability, subject to certain exceptions, to incur liens, merge, consolidate or sell, transfer or lease assets, make investments,
pay dividends, transact with subsidiaries and incur indebtedness. The credit agreement also contains customary representations and
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Note 1. Background and Description of the Business
The Chemours Company (Chemours or the Company) delivers customized solutions with a wide range of
industrial and specialty
chemical products for markets including plastics and coatings, refrigeration and air conditioning, general
industrial, mining and oil
refining. Principal products include titanium dioxide (TiO2),
refrigerants,
industrial
fluoropolymer
resins, sodium cyanide and
performance chemicals & intermediates. Chemours consists of three reportable segments: Titanium Technologies, Fluoroproducts and
Chemical Solutions.
Chemours is globally operated with manufacturing facilities, sales centers, administrative offices and warehouses located throughout
the world. Chemours’ operations are primarily located in the United States (U.S.), Canada, Mexico, Brazil, the Netherlands, Belgium,
China, Taiwan, Japan, Switzerland, Singapore, Hong Kong, India and France. As of December 31, 2016, Chemours has 26 production
facilities globally, five dedicated to Titanium Technologies, 18 dedicated to Fluoroproducts, two dedicated to Chemical Solutions and one
that supports multiple Chemours segments.
Effective prior to the opening of trading on the New York Stock Exchange (NYSE) on July 1, 2015 (the Distribution Date), E. I. DuPont
de Nemours and Company (DuPont) completed the previously announced separation of
the businesses comprising DuPont’s
Performance Chemicals reporting segment, and certain other assets and liabilities, into Chemours, a separate and distinct public
company. The separation was completed by way of a distribution of all of the then-outstanding shares of common stock of Chemours
through a dividend in kind of Chemours’ common stock (par value $0.01) to holders of DuPont common stock (par value $0.30) as of
the close of business on June 23, 2015 (the Record Date) (the transaction referred to herein as the Distribution).
On the Distribution Date, each holder of DuPont’s common stock received one share of Chemours’ common stock for every five shares
of DuPont’s common stock held on the Record Date. The separation was completed pursuant to a separation agreement and other
agreements with DuPont, including an employee matters agreement, a tax matters agreement, a transition services agreement and an
intellectual property cross-license agreement. These agreements govern the relationship between Chemours and DuPont following the
separation and provided for the allocation of various assets,
liabilities, rights and obligations. These agreements also include
arrangements for transition services to be provided by DuPont to Chemours that were substantially completed during 2016.
Unless the context otherwise requires, references in these Notes to the Consolidated Financial Statements to “we”, “us”, “our”,
“Chemours” and the “Company” refer to The Chemours Company and its consolidated subsidiaries after giving effect to the Distribution.
Note 2. Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles
in the U.S. (GAAP). The notes that follow are an integral part of the consolidated financial statements.
Chemours did not operate as a separate, stand-alone entity for all periods included within these consolidated financial statements. Prior
to the separation on July 1, 2015, Chemours operations were included in DuPont’s financial results in different legal forms, including but
not limited to wholly-owned subsidiaries for which Chemours was the sole business, components of legal entities in which Chemours
operated in conjunction with other DuPont businesses and a majority owned joint venture. For periods prior to July 1, 2015, the
accompanying consolidated financial statements have been prepared from DuPont’s historical accounting records and are presented on
a stand-alone basis as if the business operations had been conducted independently from DuPont. Prior to January 1, 2015, aside from
a Japanese entity that is a dual-resident for U.S. federal income tax purposes, there was no direct ownership relationship among all the
other various legal entities comprising Chemours. Prior to July 1, 2015, DuPont and its subsidiaries’ net investments in these operations
is shown in lieu of Stockholders’ Equity in the consolidated financial statements. The consolidated financial statements include the
historical operations, assets and liabilities of the legal entities that are considered to comprise the Chemours business, including certain
environmental remediation and litigation obligations of DuPont and its subsidiaries that Chemours may be required to indemnify
pursuant to the separation-related agreements executed prior to the spin-off.
All of
the allocations and estimates in the consolidated financial statements prior to July 1, 2015 are based on assumptions that
management believes are reasonable. Therefore, the results of operations and cash flows prior to July 1, 2015 included herein may not
be indicative of the financial position, results of operations and cash flows of Chemours in the future or if Chemours had been a
separate, stand-alone entity during the periods presented.
48
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149996_85669 Chemours Company Annual Report_Text Signature 5 Side C Magenta
149996_85669 Chemours Company Annual Report_Text Signature 5 Side C RGS 1
149996_85669 Chemours Company Annual Report_Text Signature 5 Side C RGS 6
149996_85669 Chemours Company Annual Report_Text Signature 5 Side C RGS 2
149996_85669 Chemours Company Annual Report_Text Signature 5 Side C RGS 5
149996_85669 Chemours Company Annual Report_Text Signature 5 Side C RGS 3
149996_85669 Chemours Company Annual Report_Text Signature 5 Side C RGS 4
149996_85669 Chemours Company Annual Report_Text Signature 5 Side C Yellow
149996_85669 Chemours Company Annual Report_Text Signature 5 Side C Black
149996_85669 Chemours Company Annual Report_Text Signature 5 Side C Cyan
The Chemours Company
financings,
including cross default and cross acceleration provisions to material
warranties and events of default. The senior secured credit facilities and the senior unsecured notes contain events of default
customary for these types of
indebtedness of
Chemours. We were in compliance with our debt covenants as of December 31, 2016.
The Chemours Company
Consolidated Statements of Cash Flows
(Dollars in millions)
Operating activities
Net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
7
$
(90)
$
Year Ended December 31,
2016
2015
2014
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred financing costs and issuance discount
. . . . . . . . . . . . . .
Other operating charges and credits, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on sale of assets and businesses . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliates, net of dividends received of $18, $23 and $19 . . . . .
Deferred tax benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in operating assets:
Accounts and notes receivable – trade, net
. . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories and other operating assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in operating liabilities:
Accounts payable and other operating liabilities . . . . . . . . . . . . . . . . . . . . . . .
Cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities
Purchases of property, plant and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of assets, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange contract settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash provided by (used for) investing activities . . . . . . . . . . . . . . . . . . . . . .
Financing activities
Proceeds from issuance of debt, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercised stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash provided at separation by DuPont
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net transfers (to) from DuPont
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash (used for) provided by financing activities . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest, net of amounts capitalized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes, net of refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash change in property, plant and equipment included in accounts payable . . . . . .
$
$
$
284
20
52
(254)
(12)
(111)
124
5
147
332
594
(338)
708
(12)
(1)
—
357
—
(381)
(22)
(4)
11
—
—
(396)
(19)
536
366
902
208
50
(12)
267
8
7
9
—
(198)
206
(64)
19
18
182
(519)
12
42
(32)
—
(497)
3,491
(10)
(105)
(79)
—
247
(2,857)
687
(6)
366
—
366
103
53
45
$
$
$
$
$
$
$
$
See accompanying notes to the consolidated financial statements.
401
257
—
18
(40)
1
(22)
—
4
(29)
(85)
505
(604)
32
—
(8)
20
(560)
—
—
—
—
—
—
55
55
—
—
—
—
—
—
(11)
In the event of default under the revolving credit facility, our lenders under the revolving credit facility can terminate their commitments
thereunder, cease making further revolving loans and accelerate outstanding revolving loans. This would allow the lenders under the
revolving credit facility to declare the outstanding term loans to be immediately due and payable and to institute foreclosure proceedings
against the collateral securing the credit facility, which could force us into bankruptcy or liquidation. Any event of default or declaration of
acceleration under the credit agreement also may result in an event of default under the indenture governing the notes. Any such
default, event of default or declaration of acceleration could materially and adversely affect our results of operations and financial
condition. Please see the section titled “Risks Related to our Indebtedness” of the “Risk Factors” section for additional detail.
Maturities
Chemours has required principal payments related to the Term Loan Facility of $15 million in each year from 2017 to 2021, with the
remaining balance due at maturity. Debt maturities related to the Term Loan Facility and the Notes in 2022 and beyond will be $3,513
million.
In addition, following the end of each fiscal year commencing on the year ended December 31, 2016, the Company is also required to
make additional principal repayments, depending on leverage levels as defined in the credit agreement, equivalent to up to 50% of
excess cash flow based on certain leverage targets with stepdowns to 25% and 0% as actual leverage decreases to below 3.00 to 1.00
leverage target.
Supplier Financing
In 2015, we entered into a global paying services agreement with a financial institution. Under this agreement, the financial institution
acts as the paying agent for Chemours with respect to accounts payable due to our suppliers who elect to participate in the program.
The agreement allows our suppliers to sell their receivables to the financial institution at the discretion of both parties on terms that are
negotiated between them. 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 December 31, 2016, the payment instructions from Chemours
were $134 million. Pursuant to their agreement with the financial
institution, certain suppliers may elect to get paid early at their
discretion. The available capacity under this program can vary based on the number of investors participating in this program at any
point of time.
Capital Expenditures
Our operations are capital intensive, requiring ongoing investment to upgrade or enhance existing operations and to meet environmental
and operational regulations. Our capital requirements have consisted, and are expected to continue to consist, primarily of:
•
•
•
ongoing capital expenditures, such as those required to maintain equipment reliability,
manufacturing sites and to comply with environmental regulations;
the integrity and safety of our
investments in our existing facilities to help support introduction of new products and de-bottleneck to expand capacity and
grow our business; and
investment in projects to reduce future operating costs and enhance productivity.
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149996_85669 Chemours Company Annual Report_Text Signature 5 Side D Magenta
149996_85669 Chemours Company Annual Report_Text Signature 5 Side D RGS 5
149996_85669 Chemours Company Annual Report_Text Signature 5 Side D RGS 3
149996_85669 Chemours Company Annual Report_Text Signature 5 Side D RGS 4
149996_85669 Chemours Company Annual Report_Text Signature 5 Side D RGS 2
149996_85669 Chemours Company Annual Report_Text Signature 5 Side D RGS 1
149996_85669 Chemours Company Annual Report_Text Signature 5 Side D RGS 6
149996_85669 Chemours Company Annual Report_Text Signature 5 Side D Yellow
149996_85669 Chemours Company Annual Report_Text Signature 5 Side D Black
149996_85669 Chemours Company Annual Report_Text Signature 5 Side D Cyan
The Chemours Company
The following table summarizes ongoing and expansion capital expenditures (which includes environmental capital expenditures), as
well as expenditures related to our separation from DuPont, for the years ended December 31, 2016, 2015 and 2014:
(Dollars in millions)
Titanium Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fluoroproducts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chemical Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate & Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Capital Expenditures(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Year Ended December 31,
2015
2014
2016
105
120
104
9
338
$
$
255
142
117
5
519
$
$
365
133
106
—
604
(1)
Includes separation-related capital expenditures of $66 million and $21 million for the years ended December 31, 2015 and 2014,
respectively.
Our capital expenditures, excluding separation-related spending, declined in 2016 as we finished the expansion of our Altamira
production facility. We expect our capital expenditures in 2017 to be at approximately $450 million driven in large part by expenditures
associated with our new Opteon™ plant under construction in Corpus Christi and our anticipated Mining Solutions expansion. We are
targeting to return to approximately $350 million of capital expenditures per year following the completion of the new facilities. For
further detail related to our environmental capital expenditures, please see the Environmental Matters section of this MD&A.
Contractual Obligations
Information related to the Company’s significant contractual obligations is summarized in the table below.
(Dollars in millions)
Long-term debt obligations(1) . . . . . . . . . . . . . . . . . . . .
Interest payments on long-term debt obligations(1) . . . . . .
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase obligations(2)
Raw material obligations . . . . . . . . . . . . . . . . . . . . .
Utility obligations . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total purchase obligations . . . . . . . . . . . . . . . . . . . . .
Other liabilities
Workers’ compensation . . . . . . . . . . . . . . . . . . . . . .
Asset retirement obligations . . . . . . . . . . . . . . . . . . .
Environmental remediation . . . . . . . . . . . . . . . . . . .
Legal settlements(3)
. . . . . . . . . . . . . . . . . . . . . . . .
Employee separation costs . . . . . . . . . . . . . . . . . . .
Other(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Total contractual obligations(5) . . . . . . . . . . . . . . . . . . .
Total at
December 31,
2016
$
$
3,588
1,339
259
1,244
673
341
2,258
36
43
278
348
34
56
795
8,239
2017
$
15
200
62
97
98
89
284
6
2
71
337
31
29
476
1,037
$
$
Payments Due In
2018 – 2019
30
$
398
99
2020 – 2021
30
$
396
55
$
153
143
128
424
15
2
104
4
3
4
132
1,083
$
144
129
87
360
7
—
55
4
—
4
70
911
$
2022 and
Beyond
3,513
345
43
850
303
37
1,190
8
39
48
3
—
19
117
5,208
(1) To calculate payments due for principal and interest, we assumed that interest rates, foreign currency exchange rates, and
outstanding borrowings under credit facilities were unchanged from December 31, 2016 through maturity.
(2) Represents enforceable and legally binding agreements to purchase goods or services that specify fixed or minimum quantities;
fixed minimum or variable price provisions; and the approximate timing of the agreement.
(3)
(4)
Includes $335 million litigation accrual related to the PFOA MDL Settlement (see Note 20 to the Consolidated Financial
Statements).
Includes expected contributions and benefits payments in excess of plan assets to be made to fund our pension and other
long-term employee benefit plans. Actual payments will depend on several factors, including investment performance and discount
rates, and may also be affected by changes in applicable local requirements. See Note 22 to the Consolidated Financial
Statements for additional information.
50
The Chemours Company
Consolidated Statements of Stockholders’ Equity
Years ended December 31, 2016, 2015 and 2014
(Dollars in millions)
Common Stock
Shares
Amount
Investment
Income (Loss)
Interests
Deficit
Total
Comprehensive
Noncontrolling
Accumulated
Company
Additional
Other
Accumulated
DuPont
Net
Paid-In
Capital
Balance at December 31, 2013 . . . . . .
— $
— $
3,195 $
— $
19 $
3 $
— $ 3,217
Net income . . . . . . . . . . . . . . . . . . .
Net transfers from DuPont
. . . . . . . . . .
Balance at December 31, 2014 . . . . . .
Net income (loss)
. . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . .
Issuance of common stock at
separation . . . . . . . . . . . . . . . . . . 180,966,833
Common stock issued – compensation
plans . . . . . . . . . . . . . . . . . . . . .
102,918
Establishment of pension plans, net and
related accumulated other
comprehensive income (loss) . . . . . . .
Dividends . . . . . . . . . . . . . . . . . . . .
Non-cash debt exchange . . . . . . . . . . .
Cash provided at separation by DuPont
. .
Net transfers to DuPont . . . . . . . . . . . .
Stock-based compensation expense . . . .
Net income . . . . . . . . . . . . . . . . . . .
Common stock issued – compensation
plans . . . . . . . . . . . . . . . . . . . . .
583,859
Dividends . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . .
Stock-based compensation expense . . . .
Exercise of stock options . . . . . . . . . . .
946,923
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2
—
—
—
—
—
—
—
2
—
—
—
—
—
—
—
—
—
—
—
(2)
—
—
(5)
—
—
769
13
775
—
—
(16)
—
19
11
(244)
(311)
—
—
19
—
—
—
—
—
—
—
—
—
—
—
—
—
(41)
1
—
4
—
—
—
—
—
—
—
—
—
—
4
—
—
—
—
—
—
—
—
401
55
— 3,673
(115)
(90)
—
(244)
—
—
—
—
—
—
—
7
—
(6)
—
—
—
—
—
(43)
(105)
(507)
247
(2,814)
13
130
7
—
(22)
(41)
19
11
Balance at December 31, 2015 . . . . . . 181,069,751
(536)
(115)
Balance at December 31, 2016 . . . . . . 182,600,533 $
2 $
— $
789 $
(577) $
4 $
(114) $
104
See accompanying notes to the consolidated financial statements.
400
55
3,650
25
—
—
—
268
(100)
(507)
247
(3,583)
—
—
—
—
—
—
—
—
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Consolidated Balance Sheets
(Dollars in millions, except per share amount)
(5) Due to uncertainty regarding the completion of
tax audits and possible outcomes, we are unable to determine the timing of
payments related to unrecognized tax benefits. See Note 9 to the Consolidated Financial Statements for additional information.
The Chemours Company
December 31,
December 31,
2016
2015
Off Balance Sheet Arrangements
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Accounts and notes receivable – trade, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net property, plant and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
6,060
$
6,298
5
55
Liabilities and equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
884
$
Short-term borrowings and current maturities of long-term debt
. . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingent liabilities
Equity
Common stock (par value $0.01 per share; 810,000,000 shares authorized; shares issued and
outstanding at December 31, 2016: 182,600,533 and 2015: 181,069,751)
. . . . . . . . . . . . . . .
Additional paid-in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Chemours stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
6,060
$
6,298
See accompanying notes to the consolidated financial statements.
902
807
767
77
2,553
7,997
(5,213)
2,784
170
136
417
15
872
1,771
3,529
132
524
5,956
2
789
(114)
(577)
100
4
104
366
859
972
104
2,301
9,015
(5,838)
3,177
176
136
508
973
39
454
1,466
3,915
234
553
6,168
2
775
(115)
(536)
126
4
130
Information with respect to Chemours’ guarantees is included in Note 20 to the Consolidated Financial Statements. Historically,
Chemours has not made significant payments to satisfy guarantee obligations; however, Chemours believes it has the financial
resources to satisfy these guarantees in the event required.
Recent Accounting Pronouncements
See Note 3 to the Consolidated Financial Statements included elsewhere in this Annual Report for a summary of recent accounting
pronouncements.
Critical Accounting Policies and Estimates
Chemours’ significant accounting policies are more fully described in Note 3 to the Consolidated Financial Statements. Management
believes that the application of
the financial
statements with useful and reliable information about the Company’s operating results and financial condition.
these policies on a consistent basis enables the Company to provide the users of
The preparation of
the consolidated financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts, including, but not limited to, receivable and inventory valuations, impairment of tangible
and intangible assets,
income taxes, restructuring liabilities, environmental matters, and
litigation. Management’s estimates are based on historical experience, facts and circumstances available at the time and various other
assumptions that are believed to be reasonable. The Company reviews these matters and reflects changes in estimates as appropriate.
Management believes that the following represents some of the more critical judgment areas in the applications of the Company’s
accounting policies which could have a material effect on the Company’s financial position, results of operations or cash flows.
long-term employee benefit obligations,
Goodwill
Goodwill is tested for impairment at least annually on October 1; however, impairment tests are performed more frequently when events
or changes in circumstances indicate that the asset may be impaired. Impairment exists when carrying value exceeds fair value.
Goodwill is evaluated for impairment at the reporting unit level, which is defined as one level below our operating segments with the
exception of Titanium Technologies, which is both an operating segment and a reporting unit. A reporting unit is the level at which
discrete financial information is available and reviewed by business management on a regular basis.
The Company evaluates goodwill for impairment using a two-step process. The first step is utilizing a discounted cash flow methodology
to calculate the fair value of its reporting units; and where market comparables are available, the Company includes EBITDA multiples
as part of the reporting unit valuation analysis. Key assumptions used in the discounted cash flows include projected cash flows, growth
rates, discount rates, tax rates and terminal values. Factors considered in developing cash flows and EBITDA projections include: 1)
macroeconomic conditions; 2) industry and market considerations; 3) costs of raw materials, labor or other costs having a negative
effect on earnings and cash flows; 4) overall financial performance; and 5) other relevant entity-specific events. The discount rate used
represents the weighted average cost of capital for the reporting units considering the risks and uncertainty inherent in the cash flows of
the reporting units and in the internally developed forecasts. The second step of the quantitative test is required if the first step of the
quantitative test indicates a potential impairment. The second step is performed by comparing the implied fair value of a reporting unit’s
goodwill with the carrying amount of its goodwill. If the carrying amount of goodwill is greater than its implied fair value, an impairment
loss is recorded.
Based on the evaluation performed in 2016, no impairment of goodwill was recorded as the estimated fair value of each reporting unit,
for which goodwill
is recorded, substantially exceeded the reporting unit’s carrying amount, indicating that none of the Company’s
goodwill was impaired. In 2015, in connection with the strategic evaluation of the Chemical Solutions portfolio and the resulting changes
to the reporting units in the third quarter of 2015, the Chemical Solutions segments recorded a $25 million pre-tax impairment charge
related to its Sulfur reporting unit. Sulfur reporting unit was disposed through the sale of its assets and business during 2016 (see Note
7 to the Consolidated Financial Statements for further details).
The determination of whether or not goodwill is impaired involves a significant level of judgment in the assumptions underlying the
approach used to determine the estimated fair value of our reporting units. Chemours believes that assumptions and rates used in the
impairment assessment are reasonable. However, these assumptions are judgmental and variations in any assumptions could result in
materially different calculations of fair value. The Company will continue to evaluate goodwill on an annual basis as of October 1,
and whenever events or changes in circumstances, such as significant adverse changes in operating results, market conditions or
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changes in management’s business strategy, indicate that there may be a probable indicator of impairment. It is possible that the
assumptions used by management related to the evaluation may change or that actual results may vary significantly from
management’s estimates.
Long-lived Assets
Assessment of potential impairment of property, plant and equipment and other intangible assets is an integral part of Chemours’
normal ongoing review of operations. Chemours evaluates the carrying value of long-lived assets to be held and used when events or
changes in circumstances indicate that the carrying value may not be recoverable. For purposes of recognition or measurement of an
impairment loss, the assessment is performed on the asset or asset group at the level for which identifiable cash flows are largely
independent of the cash flows of other groups of assets and liabilities. To determine the level at which the assessment is performed,
Chemours considers factors such as revenue dependency, shared costs and the extent of vertical integration. The carrying value of a
long-lived asset is considered impaired when the total projected undiscounted cash flows from the use and eventual disposition of asset
or asset group are less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value
exceeds the fair value of the long-lived asset. The fair value methodology used is an estimate of fair market value which is made based
on prices of similar assets or other valuation methodologies including present value techniques. Long-lived assets to be disposed of
other than by sale are classified as held for use until their disposal. Long-lived assets to be disposed of by sale are classified as held for
sale and are reported at the lower of carrying amount or fair market value less cost to sell. Depreciation is discontinued for long-lived
assets classified as held for sale.
Testing for potential impairment of these assets is significantly dependent on numerous assumptions and reflects management’s best
estimates at a particular point in time. The dynamic economic environments in which Chemours’ segments operate, and key economic
and business assumptions with respect to projected selling prices, market growth and inflation rates, can significantly affect the outcome
of
impairment tests. Estimates based on these assumptions may differ significantly from actual results. Changes in factors and
assumptions used in assessing potential impairments can have a significant impact on the existence and magnitude of impairments, as
well as the time in which such impairments are recognized. In addition, Chemours continually reviews its diverse portfolio of assets to
ensure they are achieving their greatest potential and are aligned with Chemours’ growth strategy. Strategic decisions involving a
particular group of assets may trigger an assessment of the recoverability of the related assets. Such an assessment could result in
impairment losses. During 2016, Chemours recorded a $48 million pre-tax asset impairment of our Pascagoula Aniline facility, $58
million pre-tax asset impairment in connection with the sale of
the Sulfur business and $13 million pre-tax asset impairment in
connection with the sale of the Company’s corporate headquarters building. During 2015, Chemours recorded a $45 million pre-tax
asset impairment of the RMS facility. All charges, except for the corporate headquarters building impairment (which is recorded in
Corporate and Other), are recorded in the Chemical Solutions segment. Refer to Notes 7, 13 and 15 to the Consolidated Financial
Statements for additional information related to these charges.
The Chemours Company
Consolidated Statements of Comprehensive Income (Loss)
(Dollars in millions)
Net income (loss)
. . . . . . . . . . . . . . . . . . . . $
(11) $
18 $
7 $ (188) $
98 $
(90) $
550 $ (149) $
401
Year Ended December 31,
2016
2015
2014
Pre-Tax
Tax
Pre-Tax
Tax
Pre-Tax
Tax
After-
Tax
After-
Tax
After-
Tax
Net loss . . . . . . . . . . . . . . . . . . . . . . .
(17)
(12)
(11)
Other comprehensive income (loss):
Unrealized gain on net investment hedge . . .
Cumulative translation adjustments . . . . . . .
Defined benefit plans, net:
Prior service credit . . . . . . . . . . . . . . . . .
Effect of foreign exchange rates . . . . . . . . .
Reclassifications to net income(1):
Amortization of prior service cost . . . . . . .
Amortization of loss . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . .
Curtailment gain . . . . . . . . . . . . . . . .
Defined benefit plans, net
. . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . . . . . .
Comprehensive (loss) income . . . . . . . . . . . .
Less: Comprehensive income attributable to
Comprehensive (loss) income attributable to
14
(73)
—
15
(1)
23
5
(2)
23
(36)
(47)
—
—
5
—
(3)
—
(6)
(1)
—
(5)
(5)
13
—
14
(73)
8
(304)
—
12
(1)
17
4
(2)
18
(41)
(34)
24
33
4
16
—
—
66
(230)
(418)
—
—
1
(4)
(8)
—
(3)
—
—
(14)
(14)
84
8
(304)
(10)
20
25
4
13
—
—
52
(244)
(334)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
550
(149)
401
—
—
—
—
—
—
—
—
—
—
—
1
noncontrolling interests . . . . . . . . . . . . . . . .
—
—
—
—
—
1
—
Chemours . . . . . . . . . . . . . . . . . . . . . . . $
(47) $
13 $
(34) $ (418) $
84 $ (334) $
549 $ (149) $
400
(1) These other comprehensive income (loss) components are included in the computation of net periodic benefit costs.
Refer to Note 22 for further information.
Environmental Liabilities and Expenditures
See accompanying notes to the consolidated financial statements.
Chemours accrues for remediation activities when it is probable that a liability has been incurred and a reasonable estimate of the
liability can be made. Where the available information is sufficient to estimate the amount of liability, that estimate has been used.
Where the information is only sufficient to establish a range of probable liability and no point within the range is more likely than any
the range has been used. Estimated liabilities are determined based upon existing remediation laws and
other, the lower end of
technologies.
in such evaluations primarily due to unknown environmental conditions, changing
governmental regulations and legal standards regarding liability, and emerging remediation technologies. These accruals are adjusted
periodically as remediation efforts progress and as additional technology, regulatory and legal information become available.
Inherent uncertainties exist
Environmental liabilities and expenditures include claims for matters that are liabilities of DuPont and its subsidiaries, that Chemours
may be required to indemnify pursuant to the separation-related agreements executed prior to the separation. Accrued liabilities are
undiscounted and do not include claims against third parties. These liabilities are included in “Other accrued liabilities” and “Other
liabilities” in the Consolidated Balance Sheet.
Costs related to environmental remediation are charged to expense in the period incurred, in “Cost of goods sold” of the Consolidated
Statement of Operations. Other environmental costs are also charged to expense in the period incurred, unless they increase the value
of the property or reduce or prevent contamination from future operations, in which case, they are capitalized and amortized.
Litigation
Chemours accrues for litigation matters when it is probable that a liability has been incurred and the amount of the liability can be
litigation
reasonably estimated. Litigation liabilities and expenditures included in the consolidated financial statements represent
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Consolidated Statements of Operations
(Dollars in millions, except per share)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
5,400
$
5,717
$
Year Ended December 31,
2016
2015
2014
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,184
1,087
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and asset related charges, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Loss) income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Benefit from) provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . .
6,432
5,072
1,360
685
143
21
—
849
20
—
19
550
149
401
1
400
4,762
955
632
97
333
25
(132)
22
54
(188)
(98)
(90)
—
4,290
1,110
934
80
170
—
29
(213)
247
(11)
(18)
7
—
7
0.04
0.04
0.12
$
$
$
$
$
$
$
$
5
Per share data
Net income (loss) attributable to Chemours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(90) $
Basic earnings (loss) per share of common stock . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings (loss) per share of common stock . . . . . . . . . . . . . . . . . . . . . . . .
Dividends per share of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.50) $
(0.50) $
0.58
2.21(1)
2.21(1)
N/A
(1) On July 1, 2015, E. I. du Pont de Nemours and Company distributed 180,966,833 shares of Chemours’ common stock to holders
of its common stock. Basic and diluted earnings (loss) per common share for the year ended December 31, 2014 was calculated
using the shares distributed on July 1, 2015. Refer to Note 10 for information regarding the calculation of basic and diluted
earnings per share.
See accompanying notes to the consolidated financial statements.
] 32 Page
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The Chemours Company
matters that are liabilities of DuPont and its subsidiaries,
to the
separation-related agreements executed prior to the Distribution. Disputes between Chemours and DuPont may arise with respect to
indemnification of
law or contract interpretation. If and to the extent these
disputes arise, they could materially adversely affect Chemours’ results of operations. Legal costs such as outside counsel fees and
expenses are charged to expense in the period services are received.
that Chemours may be required to indemnify pursuant
these matters, including disputes based on matters of
Income Taxes
The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this
approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities
are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus the change in
deferred taxes during the year. Deferred taxes result from differences between the financial and tax basis of Chemours’ assets and
liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to
reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. In evaluating the ability to realize
deferred tax assets, the Company relies on, in order of
increasing subjectivity, taxable income in prior carryback years, the future
reversals of existing taxable temporary differences, tax planning strategies and forecasted taxable income using historical and projected
future operating results.
The breadth of Chemours’ operations and the global complexity of tax regulations require assessments of uncertainties and judgments
in estimating the taxes that Chemours will ultimately pay. The final taxes paid are dependent upon many factors, including negotiations
with taxing authorities in various jurisdictions, outcomes of
tax litigation and resolution of disputes arising from federal, state and
international tax audits in the normal course of business. A liability for unrecognized tax benefits is recorded when management
concludes that the likelihood of sustaining such positions upon examination by taxing authorities is less than “more likely than not”. It is
Chemours’ policy to include accrued interest related to unrecognized tax benefits in other income, net and income tax related penalties
to be included in the provision for income taxes.
Prior to July 1, 2015, income taxes as presented herein attribute current and deferred income taxes of DuPont to Chemours’
stand-alone financial statements in a manner that is systematic, rational, and consistent with the asset and liability method prescribed
by Accounting Standards Codification 740, Income Taxes (ASC 740), issued by the Financial Accounting Standards Board (FASB).
Accordingly, Chemours’ income tax provision was prepared following the separate return method. The separate return method applies
ASC 740 to the stand-alone financial statements of each member of the consolidated group as if the group member were a separate
taxpayer and a stand-alone enterprise. As a result, actual tax transactions included in the consolidated financial statements of DuPont
may not be included in the separate combined financial statements of Chemours. Similarly, the tax treatment of certain items reflected
in the separate combined financial statements of Chemours may not be reflected in the consolidated financial statements and tax
returns of DuPont; therefore, such items as net operating losses, credit carryforwards, and valuation allowances may exist in the
stand-alone financial statements that may or may not exist in DuPont’s consolidated financial statements.
The taxable income (loss) of various Chemours entities, prior to July 1, 2015, was included in DuPont’s consolidated tax returns, where
applicable, in jurisdictions around the world. As such, separate income tax returns were not prepared for many Chemours’ entities.
Consequently, income taxes currently payable are deemed to have been remitted to DuPont, in cash, in the period the liability arose and
income taxes currently receivable are deemed to have been received from DuPont in the period that a refund could have been
recognized by Chemours had Chemours been a separate taxpayer. As described in Note 2 to the Consolidated Financial Statements,
the operations comprising Chemours are in various legal entities which have no direct ownership relationship. Consequently, no
provision has been made for income taxes on unremitted earnings of subsidiaries and affiliates. Unremitted earnings of subsidiaries
outside the U.S. are considered to be reinvested indefinitely.
Employee Benefits
The amounts recognized in the consolidated financial statements related to pension and other long-term employee benefits plans are
determined from actuarial valuations. Inherent in these valuations are assumptions including expected return on plan assets, discount
rates at which liabilities could have been settled, rate of increase in future compensation levels, and mortality rates. These assumptions
are updated annually and are disclosed in Note 22 to the Consolidated Financial Statements. In accordance with U.S. GAAP, actual
results that differed from the assumptions are accumulated and amortized over future periods and therefore, affect expense recognized
and obligations recorded in future periods.
Chemours generally utilizes discount rates that are developed by matching the expected cash flows of each benefit plan to various yield
curves constructed from a portfolio of high quality, fixed income instruments provided by the plan’s actuary as of the measurement date.
As of December 31, 2016, the weighted average discount rate was 1.8%.
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The Chemours Company
Report of Independent Registered Public Accounting Firm
Expected long-term rate of return on assets is determined by performing a detailed analysis of historical and expected returns based
on the strategic asset allocation of the underlying asset class applicable to each country. We also consider our historical experience
with the pension fund asset performance. The expected long-term rate of return is an assumption and not what is expected to be
earned in any one particular year. The weighted average long-term rate of return assumption used for determining net periodic pension
expense for 2016 was 5.7%.
A 50 basis point increase in the discount rate would result in a decrease of approximately $6 million to the net periodic benefit cost for
2017, while a 50 basis point decrease in the discount rate would result in an increase of approximately $5 million. A 50 basis point
increase in the expected return on asset assumption would result in a decrease of approximately $6 million to the net periodic benefit
cost for 2017, while a 50 basis point decrease in the expected return on asset assumption would result in an increase of approximately
$6 million.
Prior to separation, certain of Chemours’ employees participated in defined benefit pension and other post-employment benefit plans
(the Plans) sponsored by DuPont and accounted for by DuPont in accordance with accounting guidance for defined benefit pension and
other post-employment benefit plans. Substantially all expenses related to these plans were allocated in shared entities and reported
within costs of goods sold, selling, general and administrative expenses and research and development expense in the Consolidated
Statements of Operations. Chemours considered all plans to be part of a multi-employer plan with DuPont prior to January 1, 2015.
In connection with the spin-off, Chemours retained the existing Netherlands pension plan and an agreement was executed in 2015 to
ensure continuance of the plan for both DuPont and Chemours employees and retirees. As a result of that agreement, Chemours now
accounts for the Netherlands plan as a multiple employer plan. Additionally, in 2015, Chemours formed new pension plans in Taiwan,
Germany, Belgium, Switzerland, Japan, Korea and Mexico that mirror the plans historically operated by DuPont in these countries. The
new plans are accounted for under the single employer method.
Environmental Matters
Consistent with our Chemours values and our Environment, Health and Safety (EHS) Policy, Chemours is 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. Chemours is 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 Expenses and Capital Expenditures
Chemours incurs costs for pollution abatement activities including waste collection and disposal, installation and maintenance of air
pollution controls and wastewater treatment, emissions testing and monitoring and obtaining permits. Annual expenses charged to
current operations include environmental operating costs and the increase in the remediation accrual (further described below), if any,
during the period reported. We expect expenses in 2017 will be comparable or within the historical range.
To the Board of Directors and Stockholders of The Chemours Company:
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial
position of The Chemours Company and its subsidiaries at December 31, 2016 and 2015, and the results of their operations and their
cash flows for each of
the three years in the period ended December 31, 2016 in conformity with accounting principles generally
accepted in the United States of America. In addition, in our opinion the financial statement schedule listed in the index appearing under
Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related
consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2016, based on criteria established in Internal Control — Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for
these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on
Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial
statement schedule, and on the Company’s internal control over financial reporting based on our audits (which was an integrated audit
in 2016). We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all
material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our audit of
internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
5
Annual expenditures in the near future are also not expected to vary significantly from the expenditures incurred during the past few
years. However, longer term, expenditures are subject to considerable uncertainty and may fluctuate significantly. In the U.S., additional
capital expenditures are expected to be required over the next decade for treatment, storage and disposal facilities for solid and
hazardous waste and for compliance with the Clean Air Act (CAA). Until all CAA regulatory requirements are established and known,
considerable uncertainty will remain regarding estimates for future capital expenditures.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 17, 2017
For the years ended December 31, 2016 and 2015, Chemours spent approximately $13 million and $27 million, respectively, on
environmental capital projects either required by law or necessary to meet Chemours’ internal environmental objectives. We currently
estimate expenditures for environmental-related capital projects to be approximately $18 million in 2017, which will be funded by our
operating cash flows.
Management does not believe that the costs to comply with environmental requirements and the year over year changes, if any, in
environmental expenses will have a material impact on Chemours’ financial position, results of operations or cash flows.
54
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/s/ Mark P. Vergnano
Mark P. Vergnano
President and
Chief Executive Officer
February 17, 2017
those policies and procedures that:
of the assets of the company;
i.
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
ii.
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made
only in accordance with authorization of management and directors of the company; and
iii.
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of the
company’s assets that could have a material effect on the financial statements.
The Chemours Company
Management’s Report on Internal Control over Financial Reporting
Environmental Remediation
The Chemours Company
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule
13a-15(f) under the Securities Exchange Act of 1934. The company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. The company’s internal control over financial reporting includes
Mainly because of past operations, operations of predecessor companies or past disposal practices, we, like many other similar
companies, have clean-up responsibilities, associated remediation costs and are subject to claims by other parties, including claims for
matters that are liabilities of DuPont and its subsidiaries that Chemours may be required to indemnify pursuant to the separation-related
agreements executed prior to the separation.
Chemours accrues for clean-up activities consistent with the policy as described in Note 3 to the Consolidated Financial Statements.
Our environmental reserve includes estimated costs 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 state, federal and foreign laws. These laws require certain investigative,
remediation and restoration activities at sites where Chemours conducts or once conducted operations or at sites where
Chemours-generated waste was disposed. At December 31, 2016 and 2015, we recorded environmental remediation accruals of $278
and $297 million, respectively, relating to these matters which, in management’s opinion, is appropriate based on existing facts and
circumstances. The following table summarizes the activities in our remediation accruals.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
(Dollars in millions)
December 31,
2016
2015
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2016, based on
criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated
Framework (2013). Based on its assessment and those criteria, management concluded that the company maintained effective internal
control over financial reporting as of December 31, 2016.
PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of
the company’s
internal control over financial reporting as of December 31, 2016, as stated in their report, which is presented on the following page.
Balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
297
$
Remediation payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in remediation accrual
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation adjustment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(63)
44
—
Balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
278
$
302
(43)
38
—
297
Our liability covered approximately 212 sites. The table below reflects our estimated environmental liability by site category:
/s/ Mark E. Newman
Mark E. Newman
Senior Vice President and
Chief Financial Officer
Site Category
Chemours-owned(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multi-Party Superfund/Non-Owned(2)
. . . . . . . . . . . . . . . . . . . . . . . .
Closed or settled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
212
$
December 31, 2016
December 31, 2015
Number of
Sites
Remediation
Accrual
Number of
Sites
Remediation
Accrual
$
29
86
97
219
59
—
278
$
29
88
95
212
$
231
66
—
297
(1)
Includes remediation accrual of divested or sold sites where certain environmental obligations were retained by Chemours in
accordance with the related sale agreements.
(2) Sites not owned by Chemours, including sites previously owned by DuPont and sites owned by a third party where remediation
obligations are imposed by Superfund Law such as CERCLA or similar state laws.
As part of our legacy as a former subsidiary of DuPont, we are cleaning up historical
impacts to soil and groundwater that have
occurred in the past at the 29 sites that we own. These operating and former operating sites make up approximately 80% of our
remediation reserve.
In addition, we inherited numerous clean-up obligations from our DuPont legacy in approximately 86 sites. We are meeting our
obligations to clean-up those sites, including sites previously owned by DuPont and sites that Chemours or DuPont never owned or
operated. The majority of these never-owned sites are multi-party Superfund sites that Chemours, through DuPont, has been notified of
potential liability under CERCLA or similar state laws and which, in some cases, may represent a small fraction of the total waste that
was allegedly disposed of at a site. These sites represent approximately 20% of our remediation reserve. Included in the 86 is
approximately 35 inactive sites where there has been no known investigation, clean-up or monitoring activity and no remediation
obligation is imposed or required; as such, no remediation accrual is recorded.
The remaining approximately 97 sites, which are either multi-party Superfund sites and other sites not owned by Chemours, are already
closed, or settled, or for and which Chemours does not believe it has clean-up responsibility based on current information.
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The Chemours Company
Index to the Consolidated Financial Statements
Management’s Report on Internal Control over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the years ended December 31, 2016, 2015 and 2014 . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2016, 2015 and 2014 . . . .
Consolidated Balance Sheets as of December 31, 2016 and 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2016, 2015 and 2014 . . . . . . . . . . .
Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014 . . . . . . . . . . . . . . . .
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
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Our remediation portfolio is relatively mature, with many of our sites under active clean-up moving towards final completion. The below
graph illustrates the number of remediation sites by site clean-up phase, and the remediation reserve by site clean-up phase as of
December 31, 2016.
The Chemours Company
Remediation Sites by Phase
1
s
e
t
i
S
f
o
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e
b
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120
100
80
60
40
20
0
$180
97
$62
18
25
37
$36
Investigation
Active Remediation
Ongoing Maintenance
& Monitoring
Number of Sites
Reserve ($ millions)
$0
Closed
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$-
R
e
s
e
r
v
e
(
$
m
i
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n
s
)
1 The number of sites included in the chart do not include the 35 inactive sites where there has been no known investigation, clean-up or monitoring activity.
As remediation efforts progress, sites move from the investigation phase (Investigation) to the active clean-up phase, and as
construction is completed at active clean-ups (Active Remediation), those sites move to the ongoing maintenance and monitoring
(OM&M) or closure phase. As final clean-ups 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 clean-up) 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, diverse regulatory requirements, as well as the presence or
absence of other potentially responsible parties. In addition, for claims that Chemours may be required to indemnify DuPont pursuant to
the separation-related agreements, Chemours, through DuPont, has limited available information for certain sites or is in the early
stages of discussions with regulators. For these sites in particular 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 $535 million above the amount accrued at December 31, 2016. In general, uncertainty
is greatest and the range of potential liability is widest in the investigation phase, and narrows over time as regulatory agencies approve
site remedial plans, uncertainty is reduced and, ultimately, sites move into OM&M, where needed. As more sites advance from
investigation to active clean-up 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 on-going
monitoring and/or operations & maintenance of remedial systems. In addition, portfolio changes such as an acquisition or divestiture or
notification as a potentially responsible party 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, results of operations or cash flows at any given year, as such obligation can be satisfied
or settled over many years.
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F-1
Exhibit
Number
The Chemours Company
Description
While there are many remediation sites that contribute to the total environmental remediation accrual, the following sites are among the
most significant:
The Chemours Company
10.29*
Termination Agreement dated July 21, 2016 between Chemours International Operations Sarl and Thierry Vanlancker
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the U.S. Securities
and Exchange Commission on July 22, 2016).
(Dollars in millions)
December 31,
2016
2015
10.30
Letter Agreement dated January 28, 2016 by and between The Chemours Company and E. I. du Pont de Nemours and
Company (incorporated by reference to Item 10.2 to the Company’s Current Report on Form 8-K, as filed with the U.S.
Securities and Exchange Commission on February 23, 2016).
10.31*
Form of Option Award Terms under the Company’s Equity Incentive Plan for grantees located in the U.S.
10.32*
Form of Option Award Terms under the Company’s Equity Incentive Plan for grantees located outside the U.S.
10.33*
Form of Award Terms of Time-Vested Restricted Stock Units under the Company’s Equity Incentive Plan for grantees
Beaumont, Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Chambers Works, New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
East Chicago, Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pompton Lakes, New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
USS Lead, East Chicago, Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
12
24
20
77
21
124
278
$
12
20
19
87
15
144
297
10.34*
Form of Award Terms of Time-Vested Restricted Stock Units under the Company’s Equity Incentive Plan for grantees
The five sites listed above represent more than 50% of our reserve and we expect to spend, in aggregate, approximately $104 million
over the next three years. For all other sites, we expect to spend approximately $71 million over the next three years.
located in the U.S.
located outside the U.S.
10.35*
Form of Award Terms of Performance Share Units under the Company’s Equity Incentive Plan.
Beaumont Works, Beaumont, Texas
12.1
Computation of Ratio of Earnings to Fixed Charges for the Company.
Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting Firm
Rule 13a-14(a)/15d-14(a) Certification of the Company’s Principal Executive Officer.
Rule 13a-14(a)/15d-14(a) Certification of the Company’s Principal Financial Officer.
21
23
31.1
31.2
32.1
Section 1350 Certification of the company’s Principal Executive Officer. The information contained in this Exhibit shall not
be deemed filed with the Securities and Exchange Commission nor incorporated by reference in any registration
statement filed by the registrant under the Securities Act of 1933, as amended.
32.2
Section 1350 Certification of the company’s Principal Financial Officer. The information contained in this Exhibit shall not
be deemed filed with the Securities and Exchange Commission nor incorporated by reference in any registration
statement filed by the registrant under the Securities Act of 1933, as amended.
95
Mine Safety Disclosures
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
*
Management contract or compensatory plan or arrangement.
Beaumont Works began operations in 1954 in Beaumont, Jefferson County, Texas. Over the years, Beaumont Works has produced a
number of basic chemicals and elastomer products including acrylonitrile, ammonia, methanol, methyl methacrylate, caprolactam,
Hypalon® synthetic rubber, Nordel® hydrocarbon rubber and blended tetraethyl
lead with halo-carbon solvent/stabilizers. As of
December 31, 2016, with sale of the aniline production unit to Dow in 2016, Chemours has no on-going manufacturing operations on
the site. Dow and Lucite remain as long-term manufacturing tenants.
As site owner, Chemours remains responsible for remediation of historical chemical releases from past operations and is conducting
this work under a RCRA hazardous waste post-closure permit and Compliance Plan (CP) issued by the State of Texas. The hazardous
waste permit includes provisions to manage wastes and to investigate and mitigate releases. The CP is a component of the permit and
includes mitigation and monitoring requirements, including a groundwater remediation system that was installed in 1991 to control
chemical migration and protect adjacent water bodies. In addition, several solid waste management unit closures have been conducted
and areas of past release addressed through interim measures to protect people and the environment. Over the years, extensive site
studies have been completed and a final investigation report (Affected Property Assessment Report, or APAR, under the Texas Risk
Reduction Program) for the entire site was approved by the State in 2014. Chemours is currently in the process of completing a
remedial action plan (RAP) that will address all remaining historical solid waste management units and areas of concern identified in
these studies, and expects to have this RAP approved in 2017.
for Beaumont addresses remaining work identified in the RAP under review by the State as well as
The remediation accrual
post-closure care and monitoring and on-going operation of
the accrual also
addresses an outstanding Natural Resource Damage claim by state and federal trustees directed to impacts on marshlands within the
plant property.
the groundwater remediation system. A portion of
Chambers Works, Deepwater, New Jersey
The Chambers Works complex is located on the eastern shore of the Delaware River in Deepwater, 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 former Carneys Point smokeless gunpowder plant was constructed at the northern end of Carneys
Point. Site operations began in the manufacturing area around 1914 and included the manufacture of dyes, aromatics, elastomers,
CFCs, and tetraethyl lead. Chemours continues 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.
Remaining work beyond continued operation of
the IWS and groundwater monitoring includes completion of a site perimeter
sheet pile barrier intended to more efficiently contain groundwater, completion of various targeted studies onsite and in adjacent water
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bodies to close investigation data gaps, and 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.
Exhibit
Number
The Chemours Company
The Chemours Company
Description
East Chicago, Indiana
East Chicago is a former manufacturing facility owned by Chemours in East Chicago, Lake County, Indiana. The approximately
440-acre site is bounded to the south by the East Branch of
the Grand 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. Current operations, including support
activities, now cover 28 acres of the Site. The remaining business was sold to W.R. Grace Company (Grace) in early 2000, and Grace
operates the unit as a tenant. Approximately 172 acres of the site were never developed and are managed by The 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 EPA. USEPA
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.
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 EPA and work is in progress to define the final remedy for the site.
Pompton Lakes, New Jersey
During the twentieth 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. Primary contaminants in the soil and sediments are lead and
mercury. Ground water contaminants include volatile organic compounds. Under the authority of the EPA and NJDEP, remedial actions
at the site are focused on investigating and cleaning up the area. Ground water monitoring at the site is on-going, and Chemours has
installed and continues to install vapor mitigation systems at residences within the ground water plume. In addition, Chemours is further
assessing ground water conditions. In June 2015, the EPA issued a modification to the site’s RCRA permit that requires Chemours to
dredge mercury contamination from a 36-acre area of
the lake near the
shoreline. The remediation activities commenced when permits and implementation plans were approved in May 2016.
the lake and remove sediment from two other areas of
U.S. Smelter and Lead Refinery, Inc. (USS Lead), East Chicago, Indiana
The USS Lead Superfund Site is located in the Calumet neighborhood of East 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. The U.S. Environmental Protection Agency (EPA) is directing and
organizing remediation on this site, and Chemours is one of a number of parties working cooperatively with the EPA on the safe and
timely completion of
this work. DuPont’s former East Chicago manufacturing facility was located adjacent to the site, and DuPont
assigned responsibility for the site to Chemours in the 2015 separation agreement.
The USS Lead site was listed on the National Priorities List (NPL) in 2009. To facilitate negotiations with potentially responsible parties,
EPA 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 in Atlantic Richfield Co. and DuPont entering into an agreement in 2014 with EPA and the State of
Indiana to reimburse EPA’s costs to implement cleanup in Zone 1 and Zone 3. According to its website, EPA is continuing its efforts to
identify additional parties who might be potentially responsible for the cleanup of Zone 2. Once it has concluded these efforts, EPA will
engage in negotiations with all known viable and liable parties.
The environmental accrual is based on Record of Decision (“ROD”) and Statement of Work currently in place for Zones 1 and 3. EPA
has announced its intent to reconsider the ROD for Zone 1 and the result of that review could increase or decrease Chemours’ future
obligations. In addition, there is uncertainty in the outlook for Zone 2 given EPA’s stated objective to identify additional parties. As such,
Chemours’ obligation for work in Zone 2 cannot be estimated at this time.
10.14(1)
Credit Agreement, dated May 12, 2015 by and among The Chemours Company, certain Guarantors party thereto and
JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.14 to the Company’s
Amendment No. 3 to Form 10, as filed with the U.S. Securities and Exchange Commission on May 13, 2015).
10.14(2)
Amendment No. 1 to the Credit Agreement among The Chemours Company, the lenders and issuing banks thereto and
JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on September 28, 2015).
10.14(3)
Amendment No. 2 to the Credit Agreement dated February 19, 2016 by and among The Chemours Company, the lenders
and issuing banks thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Item
10.1 to the Company’s Current Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on
February 23, 2016).
10.14(4)
Amendment No. 3 to the Credit Agreement dated December 19, 2016 by and among The Chemours Company, the
lenders and issuing banks thereto and JPMorgan Chase Bank, N.A., as administrative agent.
10.15
Registration Rights Agreement, dated May 12, 2015, by and among The Chemours Company, certain Guarantors party
thereto and Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC, as representatives of
the Dollar
purchases and Credit Suisse Securities (USA) LLC and J.P Morgan Securities plc, as representatives of
the Euro
Purchasers (incorporated by reference to Exhibit 10.15 to the company’s Amendment No. 3 to Form 10, as filed with the
U.S. Securities and Exchange Commission on May 13, 2015).
10.16*
The Chemours Company Equity and Incentive Plan (incorporated by reference to Exhibit 4.1 to the Company’s Form S-8
(File No. 333-205391, as filed with the U.S. Securities and Exchange Commission on July 1, 2015).
10.17*
The Chemours Company Retirement Savings Restoration Plan (incorporated by reference to Exhibit 10.5 to the
Company’s Current Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on July 1, 2015).
10.18*
The Chemours Company Management Deferred Compensation Plan (incorporated by reference to Exhibit 4.1 to the
Company’s Form S-8 (File No. 333-205393), as filed with the U.S. Securities and Exchange Commission on July 1, 2015).
10.19*
The Chemours Company Stock Accumulation and Deferred Compensation Plan for Directors (incorporated by reference
to Exhibit 4.1 to the Company’s Form S-8 (File No. 333-205392), as filed with the U.S. Securities and Exchange
Commission on July 1, 2015).
10.20*
The Chemours Company Senior Executive Severance Plan (incorporated by reference to Exhibit 10.20 to the company’s
Amendment No. 3 to Form 10, as filed with the U.S. Securities and Exchange Commission on May 13, 2015).
10.21*
Form of Option Award Terms under the Company’s Equity Incentive Plan (incorporated by reference to Exhibit 10.21 to
the company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015).
10.22*
Form of Restricted Stock Unit Terms under the Company’s Equity Incentive Plan (incorporated by reference to Exhibit
10.22 to the company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015).
10.23*
Form of Stock Appreciation Right Terms under the Company’s Equity Incentive Plan (incorporated by reference to Exhibit
10.23 to the company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015).
10.24*
Form of Restricted Stock Unit Terms for Non-Employee Directors under
the Company’s Equity Incentive Plan
(incorporated by reference to Exhibit 10.24 to the company’s Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2015).
10.25*
Form of Performance-Based Restricted Stock Unit Terms for August 2015 (incorporated by reference to Exhibit 10.25 to
the company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015).
10.26*
Form of Performance Share Unit Award Terms under the Company’s Equity Incentive Plan (incorporated by reference to
Exhibit 10.26 to the company’s Annual Report on Form 10-K for the year ended December 31, 2015).
10.27*
Form of Cash Performance Award Terms under the Company’s Equity Incentive Plan (incorporated by reference to Exhibit
10.27 to the company’s Annual Report on Form 10-K for the year ended December 31, 2015).
10.28*
Form of Indemnification Agreement for officers and directors (incorporated by reference to Exhibit 10.28 to the company’s
Annual Report on Form 10-K for the year ended December 31, 2015).
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Exhibit
Number
The Chemours Company
EXHIBIT INDEX
Description
2.1
Separation Agreement by and between E.
I. du Pont de Nemours and Company and the Chemours Company
(incorporated by reference to Exhibit 2 to the Company’s Current Report on Form 8-K, as filed with the U.S. Securities and
Exchange Commission on July 1, 2015).
3.1
Company’s Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on July 1, 2015).
3.2
Company’s Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on
Form 8-K, as filed with the U.S. Securities and Exchange Commission on July 1, 2015).
10.1
Second Amended and Restated Transition Services Agreement by and between E. I. du Pont de Nemours and Company
and The Chemours Company (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K,
as filed with the U.S. Securities and Exchange Commission on July 1, 2015).
10.2
Tax Matters Agreement by and between E.
I. du Pont de Nemours and Company and The Chemours Company
(incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, as filed with the U.S. Securities
and Exchange Commission on July 1, 2015).
10.3
Employee Matters Agreement by and between E. I. du Pont de Nemours and Company and The Chemours Company
(incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, as filed with the U.S. Securities
and Exchange Commission on July 1, 2015).
10.4
Third Amended and Restated Intellectual Property Cross-License Agreement by and among E. I. du Pont de Nemours and
Company, The Chemours Company FC and The Chemours Company TT, LLC (incorporated by reference to Exhibit 10.4
to the Company’s Current Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on July 1,
2015).
10.5*
Offer of Employment Letter between Mark E. Newman and E. I. du Pont de Nemours and Company, dated October 14,
2014 (incorporated by reference to Exhibit 10.5 to the Company’s Amendment No. 2 to Form 10, as filed with the U.S.
Securities and Exchange Commission on April 21, 2015).
10.6*
Offer of Employment Letter between Elizabeth Albright and E. I. du Pont de Nemours and Company, dated September 25,
2014 (incorporated by reference to Exhibit 10.6 to the Company’s Amendment No. 2 to Form 10, as filed with the U.S.
Securities and Exchange Commission on April 21, 2015).
10.7
Indenture, dated May 12, 2015 by and among The Chemours Company, The Guarantors party thereto and U.S. Bank
National Association, as Trustee, Elavon Financial Services Limited, as Registrar and Transfer Agent for the Euro Notes
(incorporated by reference to Exhibit 10.7 to the Company’s Amendment No. 3 to Form 10, as filed with the U.S. Securities
and Exchange Commission on May 13, 2015).
10.8
First Supplemental Indenture, dated May 12, 2015, by and among The Chemours Company, the Guarantors party thereto
and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 10.8 to the Company’s Amendment
No. 3 to Form 10, as filed with the U.S. Securities and Exchange Commission on May 13, 2015).
10.9
Second Supplemental Indenture, dated May 12, 2015, by and among The Chemours Company, the Guarantors party
thereto and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 10.9 to the Company’s
Amendment No. 3 to Form 10, as filed with the U.S. Securities and Exchange Commission on May 13, 2015).
10.10
Third Supplemental Indenture, dated May 12, 2015, by and among The Chemours Company, the Guarantors party thereto
and U.S. Bank National Association, as Trustee, Elavon Financial Services Limited, UK Branch, as Paying Agent for the
Euro Notes and Elavon Financial Services Limited, as Registrar and Transfer Agent for the Euro Notes (incorporated by
reference to Exhibit 10.10 to the Company’s Amendment No. 3 to Form 10, as filed with the U.S. Securities and Exchange
Commission on May 13, 2015).
10.11
6.625% Notes due 2023 (included in Exhibit 10.8).
10.12
7.000% Notes due 2025 (included in Exhibit 10.9).
10.13
6.125% Notes due 2023 (included in Exhibit 10.10).
Climate Change
The Chemours Company
Chemours believes that climate change is an important global
issue that presents risks and opportunities. Chemours continuously
evaluates opportunities for existing and new product and service offerings in light of the anticipated demands of a low-carbon economy.
Our new, low GWP products are anticipated to reduce greenhouse gas content of refrigerants by 90 million metric tons carbon dioxide
equivalent in the U.S. and greater than 300 million metric tons worldwide by 2025.
We continue to monitor legislative and regulatory developments to control or limit greenhouse gas (GHG) emissions. Depending on the
scope and content, changes could affect Chemours’ energy source and supply choices, as well as increase the cost of energy and raw
materials derived from fossil fuels. Such efforts are also expected to provide the business community with greater certainty for the
regulatory future, help guide investment decisions, and drive growth in demand for low-carbon and energy-efficient products,
technologies, and services. Similarly, demand is expected to grow for products that facilitate adaptation to a changing climate.
Several of Chemours facilities in the EU are regulated under the EU Emissions Trading Scheme. In 2015, China announced a national
cap and trade program to be implemented in 2017. Similarly, South Korea implemented its emission trading scheme on January 1,
2015. In the EU, U.S. and Japan, policy efforts to reduce the GHG emissions associated with gases used in refrigeration and air
conditioning are creating market opportunities for new solutions to lower GHG emissions.
In May 2010, the EPA launched a phased-in scheme to regulate GHG emissions first from large stationary sources under the existing
Clean Air Act permitting requirements administered by state and local authorities. As a result, large capital investments may be required
to install Best Available Control Technology on major new or modified sources of GHG emissions. This type of GHG emissions
regulation by the EPA, in the absence of or in addition to federal legislation, could result in more costly, less efficient facility-by-facility
controls versus a federal program that incorporates policies that provide an economic balance that does not severely distort markets. In
2015, the EPA promulgated regulations for carbon dioxide emissions from new and reconstructed/modified Electric Generating Units
(EGUs) and for carbon dioxide emissions from existing EGUs that would be based on individual state emission reduction programs. If
these or similar regulations are enacted, they may affect the long term price and supply of electricity and natural gas and demand for
products that contribute to energy efficiency and renewable energy. Chemours, as well as our suppliers and customers, could be in a
competitive disadvantage by the added costs of complying with a variety of state-specific requirements. However, the precise impact of
these regulations is uncertain due to the anticipated legal challenges to this regulatory approach.
PFOA
See discussion under “PFOA” in Note 20 to the Consolidated Financial Statements.
Non-GAAP Financial Measures
We prepare our financial statements in accordance with U.S. GAAP. To supplement our financial information presented in accordance
with U.S. GAAP, we provide the following non-GAAP financial measures, “Adjusted EBITDA”, “Adjusted Net Income” and “Free Cash
Flow”, in order to clarify and provide investors with a better understanding of the company’s 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 Chief Operating Decision Maker (CODM).
Adjusted EBITDA is defined as income (loss) before taxes excluding the following:
•
•
•
•
•
•
•
interest expense, depreciation and amortization,
non-operating pension and other postretirement employee benefit costs, which represent the components of net periodic
pension costs (income) excluding service cost component,
exchange losses (gains) included “other income, net” of the statements of operations,
restructuring, asset-related charges and other charges, net,
asset impairments,
losses (gains) on sale of business or assets, and
other items not considered indicative of our ongoing operational performance and expected to occur infrequently.
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The Chemours Company
Adjusted net income (loss) is defined as net income (loss) attributable to Chemours adjusted for items excluded from Adjusted EBITDA
except interest expense, depreciation and amortization, and certain provision for (benefit from) income taxes. Free Cash Flow is defined
as cash provided by (used for) operating activities less cash used for purchases of property, plant and equipment as disclosed in the
Consolidated Statements of Cash Flows.
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 the company’s 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 and
Free Cash Flow 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 provide in this annual report on Form 10-K, should be read in
conjunction with the company’s financial statements and notes thereto included in this report.
The following table reconciles Adjusted EBITDA and Adjusted Net Income discussed above to net income (loss) attributable to
Chemours for the periods presented:
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
(Dollars in millions)
Year Ended December 31,
2016
2015
2014
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the registrant in the capacities and on the dates indicated:
Net income (loss) attributable to Chemours . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
7
$
(90)
$
400
Non-operating pension and other postretirement employee benefit (income) costs . . . . .
Exchange losses (gains) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset related charges(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gains) losses on sale of business or assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal and other charges(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit from income taxes relating to reconciling items(4) . . . . . . . . . . . . . . . . . . . . . .
Adjusted Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All remaining provision for income taxes(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(20)
57
51
124
(254)
19
359
(156)
187
—
213
284
138
822
$
(3)
(19)
285
73
9
9
8
(129)
143
—
132
267
31
573
$
22
66
21
—
(40)
—
—
(16)
453
1
—
257
165
876
(1) The year ended December 31, 2016 includes $48 million pre-tax asset impairment of our Pascagoula Aniline facility, $58 million
pre-tax asset impairment in connection with the sale of the Sulfur business, $13 million pre-tax asset impairment in connection with
the sale of
the Company’s corporate headquarters building and other asset write-offs. The year ended December 31, 2015
includes $25 million of goodwill impairment and $45 million asset impairment of RMS facility. All charges, except for the corporate
headquarters building impairment (which is recorded in Corporate and Other), are recorded in the Chemical Solutions segment.
Refer to Notes 7, 13, 14 and 15 to the Consolidated Financial Statements for additional information related to these charges.
(2)
Includes accounting, legal and bankers transaction fees incurred related to the Company’s strategic initiatives, which includes
pre-sale transaction costs incurred in connection with the sales of the C&D and Sulfur businesses (see Note 7 to the Consolidated
Financial Statements).
(3)
Includes litigation settlements, water treatment accruals and $335 million litigation accrual related to the PFOA MDL Settlement
(see Note 20 to the Consolidated Financial Statements), and lease termination charges.
(4) Total (benefit from) provision for income taxes reconciles to the amount reported in the consolidated statement of operations for
the years ended December 31, 2016, 2015 and 2014.
Signature
/s/ Mark P. Vergnano
Mark P. Vergnano
/s/ Mark E. Newman
Mark E. Newman
/s/ Amy P. Trojanowski
Amy P. Trojanowski
/s/ Richard H. Brown
Richard H. Brown
/s/ Curtis V. Anastasio
Curtis V. Anastasio
/s/ Bradley J. Bell
Bradley J. Bell
/s/ Mary B. Cranston
Mary B. Cranston
/s/ Curtis J. Crawford
Curtis J. Crawford
/s/ Dawn L. Farrell
Dawn L. Farrell
/s/ Stephen D. Newlin
Stephen D. Newlin
60
65
The Chemours Company
SIGNATURES
THE CHEMOURS COMPANY
(Registrant)
Date: February 17, 2017
By:
/s/ Mark E. Newman
Mark E. Newman
Senior Vice President and Chief Financial Officer
(As Duly Authorized Officer and
Principal Financial Officer)
President, Chief Executive Officer, and
February 17, 2017
Title(s)
Director
(Principal Executive Officer)
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date
February 17, 2017
Vice President and Controller
(Principal Accounting Officer)
February 17, 2017
Chairman of the Board
February 17, 2017
Director
February 17, 2017
Director
February 17, 2017
Director
February 17, 2017
Director
February 17, 2017
Director
February 17, 2017
Director
February 17, 2017
] 16 Page
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The Chemours Company
PART IV
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Chemours Company
Item 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements
See the Index to the Consolidated Financial Statements on page F-1 of this report.
(a)(2) Financial Statement Schedules
See Schedule II listed below.
Schedule II — Valuation and Qualifying Accounts
(Dollars in millions)
Accounts Receivable – Allowance for Doubtful Accounts
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Additions charged to expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deductions from reserves(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred Tax Assets – Valuation Allowance
$
$
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $
We are exposed to changes in foreign currency exchange rates because of our global operations. As a result, we have assets, liabilities
and cash flows denominated in a variety of foreign currencies. We are also exposed to changes in the prices of certain commodities
that we use in production. Changes in these rates and commodity prices may have an impact on future cash flow and earnings. We
manage these risks through normal operating and financing activities and, when deemed appropriate, through the use of derivative
financial instruments. We do not enter into derivative financial instruments for trading or speculative purposes.
the derivative instruments is
By using derivative instruments, we are subject to credit and market risk. The fair market value of
determined by using valuation models whose inputs are derived using market observable inputs, and reflects the asset or liability
position as of the end of each reporting period. When the fair value of a derivative contract is positive, the counterparty owes us, thus
creating a receivable risk for us. We are exposed to counterparty credit risk in the event of non-performance by counterparties to our
derivative agreements. We minimize counterparty credit (or repayment) risk by entering into transactions with major financial institutions
of investment grade credit rating.
Year Ended December 31,
2016
2015
2014
Foreign Currency Risks
4
1
—
—
5
50
—
50
$
$
$
$
$
$
4
1
—
(1)
4
36
—
(36)
7
1
(4)
—
4
26
10
—
36
the U.S. dollar compared to foreign currencies may impact Chemours’ earnings. In 2016 and 2015,
Fluctuations in the value of
Chemours entered into foreign currency forward contracts to minimize volatility in earnings related to the foreign exchange gains and
losses resulting from remeasuring monetary assets and liabilities that Chemours holds which are denominated in non-functional
currencies. These derivatives are stand-alone and have not been designated as a hedge. As of December 31, 2016, we had open
foreign exchange forward contracts with an aggregate notional U.S. dollar equivalent of $518 million, the fair value of which amounted
to $2 million of net unrealized loss. Chemours recognized a net loss of $15 million and a net gain of $42 million for the years ended
December 31, 2016 and 2015, respectively.
Prior to 2015, Chemours participated in DuPont’s foreign currency hedging program to reduce earnings volatility associated with
remeasurement of foreign currency denominated net monetary assets. DuPont formally documented the hedge relationships, including
identification of the hedging instruments and hedged items, the risk management objectives and strategies for undertaking the hedge
transactions, and the methodologies used to assess effectiveness and measure ineffectiveness. Realized gains and losses on derivative
instruments of DuPont were allocated by DuPont to Chemours based on projected exposure. Chemours recognized its allocable share
of the gains and losses on DuPont’s derivative financial instruments in earnings when the forecasted purchases occurred for natural
gas hedges and when the forecasted sales occurred for foreign currency hedges. The impact of Chemours’ participation in the foreign
currency hedging program was a gain of $4 million in 2014.
6
6
Release of valuation allowance(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net charges to income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $
(1) Bad debt write-offs were less than $1 for the years ended December 31, 2016 and 2015.
(2) Release of
the valuation allowance during 2015 was related to tax loss carryforward incurred prior to July 1, 2015 that is
attributable to DuPont’s tax periods pursuant to the tax matters agreement. The adjustment was recorded in the “DuPont Company
Net Investment” of the Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2015.
(a)(3) Exhibits
See the Exhibit List beginning on page 66 of this report.
Item 16.
FORM 10-K SUMMARY.
The Company has elected not to include a Form 10-K summary under this Item 16.
In a hypothetical adverse change in the market prices or rates that existed at December 31, 2016, a 10% increase in the U.S. dollar
against our outstanding hedged contracts on foreign currencies, such as the Euro and Chinese yuan, at the currency exchange rates as
of December 31, 2016 would increase our net loss by approximately $8 million, while a 10% depreciation of the U.S. Dollar against the
same hedged currencies would decrease our net loss by approximately $9 million.
Beginning in July 2015, Chemours designated its €360 million Euro notes as a hedge of its net investments in certain of its international
subsidiaries that use the Euro as functional currency in order to reduce the volatility in stockholders’ equity caused by the changes in
the Euro with respect to the U.S. dollar. Chemours uses the spot method to measure the
foreign currency exchange rates of
effectiveness of the net investment hedge. Under this method, for each reporting period, the change in the carrying value of the Euro
notes due to remeasurement of the effective portion is reported in accumulated other comprehensive loss in the Consolidated Balance
Sheet and the remaining change in the carrying value of the ineffective portion, if any, is recognized in “Other income, net” in the
Consolidated Statements of Operations. Chemours evaluates the effectiveness of its net investment hedge at the beginning of every
quarter.
Chemours’ risk management programs and the underlying exposure are closely correlated, such that the potential loss in value for the
risk management portfolio described above would be largely offset by change in the value of the underlying exposure. See Note 21 to
the Consolidated Financial Statements for further information.
Concentration of Credit Risk
Chemours’ sales are not dependent on any single customer. As of December 31, 2016 and 2015, no individual customer balance
represented more than five percent of Chemours’ total outstanding receivables balance. Credit risk associated with Chemours’
receivables balance is representative of the geographic, industry and customer diversity associated with Chemours’ global businesses.
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The Chemours Company
As a result of our customer base being widely dispersed, we do not believe our exposure to credit-related losses related to our business
as of December 31, 2016 and 2015 was material.
Chemours also maintains strong credit controls in evaluating and granting customer credit. As a result, it may require that customers
provide some type of financial guarantee in certain circumstances. Length of terms for customer credit varies by industry and region.
Commodities Risk
A portion of our products and raw materials are commodities whose prices fluctuate as market supply and demand fundamentals
change. Accordingly, product margins and the level of our profitability tend to fluctuate with the changes in the business cycle.
Chemours tries to protect against such instability through various business strategies. These include provisions in sales contracts
allowing us to pass on higher raw material costs through timely price increases and formula price contracts to transfer or share
commodity price risk. Chemours did not have any commodity derivative instruments in place as of December 31, 2016 and 2015.
The Chemours Company
PART III
Item 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Except for information concerning executive officers, which is included in Part I of this annual report under the caption “Executive
Officers of
the Registrant”, the information about the Company’s directors required by this Item 10 is contained under the caption
“Proposal 1 — Election of Directors” in the Company’s definitive proxy statement for its 2017 annual meeting of stockholders (2017
Proxy Statement) which the Company anticipates filing with the Securities and Exchange Commission within 120 days after the end of
the fiscal year to which this report relates, and is incorporated herein by reference.
Information regarding the Company’s Audit Committee, code of ethics, and compliance with Section 16(a) of the Exchange Act is
contained in the 2017 Proxy Statement under the captions “Corporate Governance”, “Board Structure and Committee Composition” and
“Section 16(a) Beneficial Ownership Reporting Compliance” and is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 11.
EXECUTIVE COMPENSATION
The financial statements and supplementary data required by this Item are included herein, commencing on page F-1 of this Annual
Report.
The information required by this Item 11 is contained in the 2017 Proxy Statement under the captions “Executive Compensation”,
“Director Compensation”, “Compensation Committee Report” and “Compensation Committee Interlocks and Insider Participation” and is
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
None.
Item 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures designed to provide reasonable assurance that information required to be
disclosed in the Company’s reports filed or submitted under the Securities Exchange Act of 1934 (Exchange Act) is recorded,
processed, summarized and reported within the time periods specified in the rules and forms of
the Securities and Exchange
Commission. These controls and procedures also provide reasonable assurance that information required to be disclosed in such
reports is accumulated and communicated to management, including its Chief Executive Officer (CEO) and Chief Financial Officer
(CFO), to allow timely decisions regarding required disclosures.
As of December 31, 2016, the Company’s CEO and CFO, together with management, conducted an evaluation of the effectiveness of
the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Based on that evaluation, the
CEO and CFO have concluded that these disclosure controls and procedures are effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting that occurred during the quarter ended
December 31, 2016 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over
financial reporting.
Management’s Report on Internal Control over Financial Reporting
The Company has completed its evaluation of its internal control over financial reporting and has concluded that the Company’s internal
control over financial reporting was effective as of December 31, 2016 (see Management’s Report on Internal Control over Financial
Reporting on page F-2).
3,000,000 shares.
Item 9B. OTHER INFORMATION
None.
62
63
incorporated herein by reference.
MATTERS
The information required by Item 12 and not otherwise set forth below is contained in the 2017 Proxy Statement under the caption
“Security Ownership of Certain Beneficial Owners and Management” and is incorporated herein by reference.
Securities authorized for issuance under equity compensation plans as of December 31, 2016
(shares in thousands, except per share)
Plan Category
Equity compensation plans approved by security
holders . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of securities to be
issued upon Exercise of
Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights(1)
Outstanding Options,
Warrants and Rights(2)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans(3)
6
6
11,088 $
13.72
7,806
(1)
Includes outstanding stock options, restricted stock units, performance stock units granted under the Company’s Equity and
Incentive Plan.
(2) Represents the weighted average exercise price of the outstanding stock options only. No exercise price related to the restricted
stock units and performance stock units.
(3) Reflects shares available for issuance pursuant to the Equity and Incentive Plan approved by our former parent prior to separation
while the Company was a wholly-owned subsidiary of DuPont (see Note 23 to Consolidated Financial Statements for further
information). The maximum number of shares of stock reserved for the grant or settlement of awards under the plan shall be
13,500,000 plus the number of shares of stock of
the converted DuPont awards. The aggregate number of shares of stock
granted during any fiscal year to any single individual (other than with regard to converted DuPont awards) shall not exceed
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by Item 13 is contained in the 2017 Proxy Statement under the captions “Director Independence” and “Certain
Relationships and Transactions” and is incorporated herein by reference.
Item 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by Item 14 is contained in the 2017 Proxy Statement under the captions “Proposal 3 — Ratification of
Selection of Independent Registered Public Accounting Firm”, “Fees Paid to Independent Registered Public Accounting Firm” and “Audit
Committee’s Pre-Approval Policies and Procedures” and is incorporated herein by reference.
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As a result of our customer base being widely dispersed, we do not believe our exposure to credit-related losses related to our business
as of December 31, 2016 and 2015 was material.
Chemours also maintains strong credit controls in evaluating and granting customer credit. As a result, it may require that customers
provide some type of financial guarantee in certain circumstances. Length of terms for customer credit varies by industry and region.
Commodities Risk
A portion of our products and raw materials are commodities whose prices fluctuate as market supply and demand fundamentals
change. Accordingly, product margins and the level of our profitability tend to fluctuate with the changes in the business cycle.
Chemours tries to protect against such instability through various business strategies. These include provisions in sales contracts
allowing us to pass on higher raw material costs through timely price increases and formula price contracts to transfer or share
commodity price risk. Chemours did not have any commodity derivative instruments in place as of December 31, 2016 and 2015.
The financial statements and supplementary data required by this Item are included herein, commencing on page F-1 of this Annual
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Report.
None.
Item 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures designed to provide reasonable assurance that information required to be
disclosed in the Company’s reports filed or submitted under the Securities Exchange Act of 1934 (Exchange Act) is recorded,
processed, summarized and reported within the time periods specified in the rules and forms of
the Securities and Exchange
Commission. These controls and procedures also provide reasonable assurance that information required to be disclosed in such
reports is accumulated and communicated to management, including its Chief Executive Officer (CEO) and Chief Financial Officer
(CFO), to allow timely decisions regarding required disclosures.
As of December 31, 2016, the Company’s CEO and CFO, together with management, conducted an evaluation of the effectiveness of
the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Based on that evaluation, the
CEO and CFO have concluded that these disclosure controls and procedures are effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting that occurred during the quarter ended
December 31, 2016 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over
financial reporting.
Management’s Report on Internal Control over Financial Reporting
The Company has completed its evaluation of its internal control over financial reporting and has concluded that the Company’s internal
control over financial reporting was effective as of December 31, 2016 (see Management’s Report on Internal Control over Financial
Reporting on page F-2).
Item 9B. OTHER INFORMATION
None.
The Chemours Company
PART III
Item 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Except for information concerning executive officers, which is included in Part I of this annual report under the caption “Executive
Officers of
the Registrant”, the information about the Company’s directors required by this Item 10 is contained under the caption
“Proposal 1 — Election of Directors” in the Company’s definitive proxy statement for its 2017 annual meeting of stockholders (2017
Proxy Statement) which the Company anticipates filing with the Securities and Exchange Commission within 120 days after the end of
the fiscal year to which this report relates, and is incorporated herein by reference.
Information regarding the Company’s Audit Committee, code of ethics, and compliance with Section 16(a) of the Exchange Act is
contained in the 2017 Proxy Statement under the captions “Corporate Governance”, “Board Structure and Committee Composition” and
“Section 16(a) Beneficial Ownership Reporting Compliance” and is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 11.
EXECUTIVE COMPENSATION
The information required by this Item 11 is contained in the 2017 Proxy Statement under the captions “Executive Compensation”,
“Director Compensation”, “Compensation Committee Report” and “Compensation Committee Interlocks and Insider Participation” and is
incorporated herein by reference.
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
The information required by Item 12 and not otherwise set forth below is contained in the 2017 Proxy Statement under the caption
“Security Ownership of Certain Beneficial Owners and Management” and is incorporated herein by reference.
Securities authorized for issuance under equity compensation plans as of December 31, 2016
(shares in thousands, except per share)
Plan Category
Equity compensation plans approved by security
holders . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of securities to be
issued upon Exercise of
Outstanding Options,
Warrants and Rights(1)
Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights(2)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans(3)
6
6
11,088 $
13.72
7,806
(1)
Includes outstanding stock options, restricted stock units, performance stock units granted under the Company’s Equity and
Incentive Plan.
(2) Represents the weighted average exercise price of the outstanding stock options only. No exercise price related to the restricted
stock units and performance stock units.
(3) Reflects shares available for issuance pursuant to the Equity and Incentive Plan approved by our former parent prior to separation
while the Company was a wholly-owned subsidiary of DuPont (see Note 23 to Consolidated Financial Statements for further
information). The maximum number of shares of stock reserved for the grant or settlement of awards under the plan shall be
13,500,000 plus the number of shares of stock of
the converted DuPont awards. The aggregate number of shares of stock
granted during any fiscal year to any single individual (other than with regard to converted DuPont awards) shall not exceed
3,000,000 shares.
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by Item 13 is contained in the 2017 Proxy Statement under the captions “Director Independence” and “Certain
Relationships and Transactions” and is incorporated herein by reference.
Item 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by Item 14 is contained in the 2017 Proxy Statement under the captions “Proposal 3 — Ratification of
Selection of Independent Registered Public Accounting Firm”, “Fees Paid to Independent Registered Public Accounting Firm” and “Audit
Committee’s Pre-Approval Policies and Procedures” and is incorporated herein by reference.
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The Chemours Company
PART IV
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Chemours Company
Item 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements
See the Index to the Consolidated Financial Statements on page F-1 of this report.
(a)(2) Financial Statement Schedules
See Schedule II listed below.
We are exposed to changes in foreign currency exchange rates because of our global operations. As a result, we have assets, liabilities
and cash flows denominated in a variety of foreign currencies. We are also exposed to changes in the prices of certain commodities
that we use in production. Changes in these rates and commodity prices may have an impact on future cash flow and earnings. We
manage these risks through normal operating and financing activities and, when deemed appropriate, through the use of derivative
financial instruments. We do not enter into derivative financial instruments for trading or speculative purposes.
By using derivative instruments, we are subject to credit and market risk. The fair market value of
the derivative instruments is
determined by using valuation models whose inputs are derived using market observable inputs, and reflects the asset or liability
position as of the end of each reporting period. When the fair value of a derivative contract is positive, the counterparty owes us, thus
creating a receivable risk for us. We are exposed to counterparty credit risk in the event of non-performance by counterparties to our
derivative agreements. We minimize counterparty credit (or repayment) risk by entering into transactions with major financial institutions
Schedule II — Valuation and Qualifying Accounts
of investment grade credit rating.
(Dollars in millions)
Accounts Receivable – Allowance for Doubtful Accounts
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Additions charged to expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deductions from reserves(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred Tax Assets – Valuation Allowance
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net charges to income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Release of valuation allowance(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
6
6
Year Ended December 31,
2016
2015
2014
Foreign Currency Risks
4
1
—
—
5
$
$
— $
50
—
50
$
$
$
4
1
—
(1)
4
36
—
(36)
$
— $
7
1
(4)
—
4
26
10
—
36
Fluctuations in the value of
the U.S. dollar compared to foreign currencies may impact Chemours’ earnings. In 2016 and 2015,
Chemours entered into foreign currency forward contracts to minimize volatility in earnings related to the foreign exchange gains and
losses resulting from remeasuring monetary assets and liabilities that Chemours holds which are denominated in non-functional
currencies. These derivatives are stand-alone and have not been designated as a hedge. As of December 31, 2016, we had open
foreign exchange forward contracts with an aggregate notional U.S. dollar equivalent of $518 million, the fair value of which amounted
to $2 million of net unrealized loss. Chemours recognized a net loss of $15 million and a net gain of $42 million for the years ended
December 31, 2016 and 2015, respectively.
Prior to 2015, Chemours participated in DuPont’s foreign currency hedging program to reduce earnings volatility associated with
remeasurement of foreign currency denominated net monetary assets. DuPont formally documented the hedge relationships, including
identification of the hedging instruments and hedged items, the risk management objectives and strategies for undertaking the hedge
transactions, and the methodologies used to assess effectiveness and measure ineffectiveness. Realized gains and losses on derivative
instruments of DuPont were allocated by DuPont to Chemours based on projected exposure. Chemours recognized its allocable share
of the gains and losses on DuPont’s derivative financial instruments in earnings when the forecasted purchases occurred for natural
gas hedges and when the forecasted sales occurred for foreign currency hedges. The impact of Chemours’ participation in the foreign
currency hedging program was a gain of $4 million in 2014.
(1) Bad debt write-offs were less than $1 for the years ended December 31, 2016 and 2015.
(2) Release of
the valuation allowance during 2015 was related to tax loss carryforward incurred prior to July 1, 2015 that is
attributable to DuPont’s tax periods pursuant to the tax matters agreement. The adjustment was recorded in the “DuPont Company
Net Investment” of the Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2015.
(a)(3) Exhibits
See the Exhibit List beginning on page 66 of this report.
Item 16.
FORM 10-K SUMMARY.
The Company has elected not to include a Form 10-K summary under this Item 16.
quarter.
In a hypothetical adverse change in the market prices or rates that existed at December 31, 2016, a 10% increase in the U.S. dollar
against our outstanding hedged contracts on foreign currencies, such as the Euro and Chinese yuan, at the currency exchange rates as
of December 31, 2016 would increase our net loss by approximately $8 million, while a 10% depreciation of the U.S. Dollar against the
same hedged currencies would decrease our net loss by approximately $9 million.
Beginning in July 2015, Chemours designated its €360 million Euro notes as a hedge of its net investments in certain of its international
subsidiaries that use the Euro as functional currency in order to reduce the volatility in stockholders’ equity caused by the changes in
foreign currency exchange rates of
the Euro with respect to the U.S. dollar. Chemours uses the spot method to measure the
effectiveness of the net investment hedge. Under this method, for each reporting period, the change in the carrying value of the Euro
notes due to remeasurement of the effective portion is reported in accumulated other comprehensive loss in the Consolidated Balance
Sheet and the remaining change in the carrying value of the ineffective portion, if any, is recognized in “Other income, net” in the
Consolidated Statements of Operations. Chemours evaluates the effectiveness of its net investment hedge at the beginning of every
Chemours’ risk management programs and the underlying exposure are closely correlated, such that the potential loss in value for the
risk management portfolio described above would be largely offset by change in the value of the underlying exposure. See Note 21 to
the Consolidated Financial Statements for further information.
Concentration of Credit Risk
Chemours’ sales are not dependent on any single customer. As of December 31, 2016 and 2015, no individual customer balance
represented more than five percent of Chemours’ total outstanding receivables balance. Credit risk associated with Chemours’
receivables balance is representative of the geographic, industry and customer diversity associated with Chemours’ global businesses.
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The Chemours Company
Adjusted net income (loss) is defined as net income (loss) attributable to Chemours adjusted for items excluded from Adjusted EBITDA
except interest expense, depreciation and amortization, and certain provision for (benefit from) income taxes. Free Cash Flow is defined
as cash provided by (used for) operating activities less cash used for purchases of property, plant and equipment as disclosed in the
Consolidated Statements of Cash Flows.
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 the company’s 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 and
Free Cash Flow 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 provide in this annual report on Form 10-K, should be read in
conjunction with the company’s financial statements and notes thereto included in this report.
The following table reconciles Adjusted EBITDA and Adjusted Net Income discussed above to net income (loss) attributable to
Chemours for the periods presented:
(Dollars in millions)
Non-operating pension and other postretirement employee benefit (income) costs . . . . .
Exchange losses (gains) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset related charges(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gains) losses on sale of business or assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal and other charges(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit from income taxes relating to reconciling items(4) . . . . . . . . . . . . . . . . . . . . . .
Adjusted Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All remaining provision for income taxes(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(20)
57
51
124
(254)
19
359
(156)
187
—
213
284
138
822
(3)
(19)
285
73
9
9
8
(129)
143
—
132
267
31
573
22
66
21
—
—
—
(40)
(16)
453
1
—
257
165
876
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
(1) The year ended December 31, 2016 includes $48 million pre-tax asset impairment of our Pascagoula Aniline facility, $58 million
pre-tax asset impairment in connection with the sale of the Sulfur business, $13 million pre-tax asset impairment in connection with
the sale of
the Company’s corporate headquarters building and other asset write-offs. The year ended December 31, 2015
includes $25 million of goodwill impairment and $45 million asset impairment of RMS facility. All charges, except for the corporate
headquarters building impairment (which is recorded in Corporate and Other), are recorded in the Chemical Solutions segment.
Refer to Notes 7, 13, 14 and 15 to the Consolidated Financial Statements for additional information related to these charges.
(2)
Includes accounting, legal and bankers transaction fees incurred related to the Company’s strategic initiatives, which includes
pre-sale transaction costs incurred in connection with the sales of the C&D and Sulfur businesses (see Note 7 to the Consolidated
Financial Statements).
(3)
Includes litigation settlements, water treatment accruals and $335 million litigation accrual related to the PFOA MDL Settlement
(see Note 20 to the Consolidated Financial Statements), and lease termination charges.
(4) Total (benefit from) provision for income taxes reconciles to the amount reported in the consolidated statement of operations for
the years ended December 31, 2016, 2015 and 2014.
The Chemours Company
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE CHEMOURS COMPANY
(Registrant)
Date: February 17, 2017
By:
/s/ Mark E. Newman
Mark E. Newman
Senior Vice President and Chief Financial Officer
(As Duly Authorized Officer and
Principal Financial Officer)
Net income (loss) attributable to Chemours . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
7
$
(90)
$
400
Year Ended December 31,
2016
2015
2014
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the registrant in the capacities and on the dates indicated:
Signature
Title(s)
Date
/s/ Mark P. Vergnano
Mark P. Vergnano
/s/ Mark E. Newman
Mark E. Newman
/s/ Amy P. Trojanowski
Amy P. Trojanowski
/s/ Richard H. Brown
Richard H. Brown
/s/ Curtis V. Anastasio
Curtis V. Anastasio
/s/ Bradley J. Bell
Bradley J. Bell
/s/ Mary B. Cranston
Mary B. Cranston
/s/ Curtis J. Crawford
Curtis J. Crawford
/s/ Dawn L. Farrell
Dawn L. Farrell
/s/ Stephen D. Newlin
Stephen D. Newlin
President, Chief Executive Officer, and
Director
(Principal Executive Officer)
February 17, 2017
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
February 17, 2017
Vice President and Controller
(Principal Accounting Officer)
February 17, 2017
Chairman of the Board
February 17, 2017
Director
February 17, 2017
Director
February 17, 2017
Director
February 17, 2017
Director
February 17, 2017
Director
February 17, 2017
Director
February 17, 2017
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Exhibit
Number
2.1
3.1
3.2
10.1
10.2
10.3
10.4
10.5*
10.6*
10.7
10.8
10.9
10.10
The Chemours Company
EXHIBIT INDEX
Description
I. du Pont de Nemours and Company and the Chemours Company
Separation Agreement by and between E.
(incorporated by reference to Exhibit 2 to the Company’s Current Report on Form 8-K, as filed with the U.S. Securities and
Exchange Commission on July 1, 2015).
Company’s Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on July 1, 2015).
Company’s Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on
Form 8-K, as filed with the U.S. Securities and Exchange Commission on July 1, 2015).
Second Amended and Restated Transition Services Agreement by and between E. I. du Pont de Nemours and Company
and The Chemours Company (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K,
as filed with the U.S. Securities and Exchange Commission on July 1, 2015).
Tax Matters Agreement by and between E.
I. du Pont de Nemours and Company and The Chemours Company
(incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, as filed with the U.S. Securities
and Exchange Commission on July 1, 2015).
Employee Matters Agreement by and between E. I. du Pont de Nemours and Company and The Chemours Company
(incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, as filed with the U.S. Securities
and Exchange Commission on July 1, 2015).
Third Amended and Restated Intellectual Property Cross-License Agreement by and among E. I. du Pont de Nemours and
Company, The Chemours Company FC and The Chemours Company TT, LLC (incorporated by reference to Exhibit 10.4
to the Company’s Current Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on July 1,
2015).
Offer of Employment Letter between Mark E. Newman and E. I. du Pont de Nemours and Company, dated October 14,
2014 (incorporated by reference to Exhibit 10.5 to the Company’s Amendment No. 2 to Form 10, as filed with the U.S.
Securities and Exchange Commission on April 21, 2015).
PFOA
Climate Change
The Chemours Company
Chemours believes that climate change is an important global
issue that presents risks and opportunities. Chemours continuously
evaluates opportunities for existing and new product and service offerings in light of the anticipated demands of a low-carbon economy.
Our new, low GWP products are anticipated to reduce greenhouse gas content of refrigerants by 90 million metric tons carbon dioxide
equivalent in the U.S. and greater than 300 million metric tons worldwide by 2025.
We continue to monitor legislative and regulatory developments to control or limit greenhouse gas (GHG) emissions. Depending on the
scope and content, changes could affect Chemours’ energy source and supply choices, as well as increase the cost of energy and raw
materials derived from fossil fuels. Such efforts are also expected to provide the business community with greater certainty for the
regulatory future, help guide investment decisions, and drive growth in demand for low-carbon and energy-efficient products,
technologies, and services. Similarly, demand is expected to grow for products that facilitate adaptation to a changing climate.
Several of Chemours facilities in the EU are regulated under the EU Emissions Trading Scheme. In 2015, China announced a national
cap and trade program to be implemented in 2017. Similarly, South Korea implemented its emission trading scheme on January 1,
2015. In the EU, U.S. and Japan, policy efforts to reduce the GHG emissions associated with gases used in refrigeration and air
conditioning are creating market opportunities for new solutions to lower GHG emissions.
In May 2010, the EPA launched a phased-in scheme to regulate GHG emissions first from large stationary sources under the existing
Clean Air Act permitting requirements administered by state and local authorities. As a result, large capital investments may be required
to install Best Available Control Technology on major new or modified sources of GHG emissions. This type of GHG emissions
regulation by the EPA, in the absence of or in addition to federal legislation, could result in more costly, less efficient facility-by-facility
controls versus a federal program that incorporates policies that provide an economic balance that does not severely distort markets. In
2015, the EPA promulgated regulations for carbon dioxide emissions from new and reconstructed/modified Electric Generating Units
(EGUs) and for carbon dioxide emissions from existing EGUs that would be based on individual state emission reduction programs. If
these or similar regulations are enacted, they may affect the long term price and supply of electricity and natural gas and demand for
products that contribute to energy efficiency and renewable energy. Chemours, as well as our suppliers and customers, could be in a
competitive disadvantage by the added costs of complying with a variety of state-specific requirements. However, the precise impact of
these regulations is uncertain due to the anticipated legal challenges to this regulatory approach.
Offer of Employment Letter between Elizabeth Albright and E. I. du Pont de Nemours and Company, dated September 25,
2014 (incorporated by reference to Exhibit 10.6 to the Company’s Amendment No. 2 to Form 10, as filed with the U.S.
Securities and Exchange Commission on April 21, 2015).
Indenture, dated May 12, 2015 by and among The Chemours Company, The Guarantors party thereto and U.S. Bank
National Association, as Trustee, Elavon Financial Services Limited, as Registrar and Transfer Agent for the Euro Notes
(incorporated by reference to Exhibit 10.7 to the Company’s Amendment No. 3 to Form 10, as filed with the U.S. Securities
and Exchange Commission on May 13, 2015).
First Supplemental Indenture, dated May 12, 2015, by and among The Chemours Company, the Guarantors party thereto
and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 10.8 to the Company’s Amendment
No. 3 to Form 10, as filed with the U.S. Securities and Exchange Commission on May 13, 2015).
Second Supplemental Indenture, dated May 12, 2015, by and among The Chemours Company, the Guarantors party
thereto and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 10.9 to the Company’s
Amendment No. 3 to Form 10, as filed with the U.S. Securities and Exchange Commission on May 13, 2015).
Third Supplemental Indenture, dated May 12, 2015, by and among The Chemours Company, the Guarantors party thereto
and U.S. Bank National Association, as Trustee, Elavon Financial Services Limited, UK Branch, as Paying Agent for the
Euro Notes and Elavon Financial Services Limited, as Registrar and Transfer Agent for the Euro Notes (incorporated by
reference to Exhibit 10.10 to the Company’s Amendment No. 3 to Form 10, as filed with the U.S. Securities and Exchange
Commission on May 13, 2015).
See discussion under “PFOA” in Note 20 to the Consolidated Financial Statements.
Non-GAAP Financial Measures
We prepare our financial statements in accordance with U.S. GAAP. To supplement our financial information presented in accordance
with U.S. GAAP, we provide the following non-GAAP financial measures, “Adjusted EBITDA”, “Adjusted Net Income” and “Free Cash
Flow”, in order to clarify and provide investors with a better understanding of the company’s 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 Chief Operating Decision Maker (CODM).
Adjusted EBITDA is defined as income (loss) before taxes excluding the following:
interest expense, depreciation and amortization,
non-operating pension and other postretirement employee benefit costs, which represent the components of net periodic
pension costs (income) excluding service cost component,
exchange losses (gains) included “other income, net” of the statements of operations,
10.11
6.625% Notes due 2023 (included in Exhibit 10.8).
10.12
7.000% Notes due 2025 (included in Exhibit 10.9).
10.13
6.125% Notes due 2023 (included in Exhibit 10.10).
restructuring, asset-related charges and other charges, net,
asset impairments,
losses (gains) on sale of business or assets, and
other items not considered indicative of our ongoing operational performance and expected to occur infrequently.
•
•
•
•
•
•
•
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The Chemours Company
bodies to close investigation data gaps, and 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 owned by Chemours in East Chicago, Lake County, Indiana. The approximately
440-acre site is bounded to the south by the East Branch of
the Grand 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
Exhibit
Number
10.14(1)
10.14(2)
chemical manufacturing began in 1944, consisting primarily of chlorofluorocarbons production. Current operations, including support
10.14(3)
activities, now cover 28 acres of the Site. The remaining business was sold to W.R. Grace Company (Grace) in early 2000, and Grace
operates the unit as a tenant. Approximately 172 acres of the site were never developed and are managed by The Nature Conservancy
for habitat preservation.
The Chemours Company
Description
Credit Agreement, dated May 12, 2015 by and among The Chemours Company, certain Guarantors party thereto and
JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.14 to the Company’s
Amendment No. 3 to Form 10, as filed with the U.S. Securities and Exchange Commission on May 13, 2015).
Amendment No. 1 to the Credit Agreement among The Chemours Company, the lenders and issuing banks thereto and
JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on September 28, 2015).
Amendment No. 2 to the Credit Agreement dated February 19, 2016 by and among The Chemours Company, the lenders
and issuing banks thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Item
10.1 to the Company’s Current Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on
February 23, 2016).
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 EPA. USEPA
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.
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 EPA and work is in progress to define the final remedy for the site.
Pompton Lakes, New Jersey
During the twentieth 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. Primary contaminants in the soil and sediments are lead and
mercury. Ground water contaminants include volatile organic compounds. Under the authority of the EPA and NJDEP, remedial actions
at the site are focused on investigating and cleaning up the area. Ground water monitoring at the site is on-going, and Chemours has
installed and continues to install vapor mitigation systems at residences within the ground water plume. In addition, Chemours is further
assessing ground water conditions. In June 2015, the EPA issued a modification to the site’s RCRA permit that requires Chemours 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.
U.S. Smelter and Lead Refinery, Inc. (USS Lead), East Chicago, Indiana
The USS Lead Superfund Site is located in the Calumet neighborhood of East 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. The U.S. Environmental Protection Agency (EPA) is directing and
organizing remediation on this site, and Chemours is one of a number of parties working cooperatively with the EPA on the safe and
timely completion of
this work. DuPont’s former East Chicago manufacturing facility was located adjacent to the site, and DuPont
assigned responsibility for the site to Chemours in the 2015 separation agreement.
The USS Lead site was listed on the National Priorities List (NPL) in 2009. To facilitate negotiations with potentially responsible parties,
EPA 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 in Atlantic Richfield Co. and DuPont entering into an agreement in 2014 with EPA and the State of
Indiana to reimburse EPA’s costs to implement cleanup in Zone 1 and Zone 3. According to its website, EPA is continuing its efforts to
identify additional parties who might be potentially responsible for the cleanup of Zone 2. Once it has concluded these efforts, EPA will
engage in negotiations with all known viable and liable parties.
The environmental accrual is based on Record of Decision (“ROD”) and Statement of Work currently in place for Zones 1 and 3. EPA
has announced its intent to reconsider the ROD for Zone 1 and the result of that review could increase or decrease Chemours’ future
obligations. In addition, there is uncertainty in the outlook for Zone 2 given EPA’s stated objective to identify additional parties. As such,
Chemours’ obligation for work in Zone 2 cannot be estimated at this time.
10.14(4)
Amendment No. 3 to the Credit Agreement dated December 19, 2016 by and among The Chemours Company, the
lenders and issuing banks thereto and JPMorgan Chase Bank, N.A., as administrative agent.
10.15
10.16*
10.17*
10.18*
10.19*
10.20*
10.21*
10.22*
10.23*
10.24*
10.25*
10.26*
10.27*
10.28*
Registration Rights Agreement, dated May 12, 2015, by and among The Chemours Company, certain Guarantors party
the Dollar
thereto and Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC, as representatives of
purchases and Credit Suisse Securities (USA) LLC and J.P Morgan Securities plc, as representatives of
the Euro
Purchasers (incorporated by reference to Exhibit 10.15 to the company’s Amendment No. 3 to Form 10, as filed with the
U.S. Securities and Exchange Commission on May 13, 2015).
The Chemours Company Equity and Incentive Plan (incorporated by reference to Exhibit 4.1 to the Company’s Form S-8
(File No. 333-205391, as filed with the U.S. Securities and Exchange Commission on July 1, 2015).
The Chemours Company Retirement Savings Restoration Plan (incorporated by reference to Exhibit 10.5 to the
Company’s Current Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on July 1, 2015).
The Chemours Company Management Deferred Compensation Plan (incorporated by reference to Exhibit 4.1 to the
Company’s Form S-8 (File No. 333-205393), as filed with the U.S. Securities and Exchange Commission on July 1, 2015).
The Chemours Company Stock Accumulation and Deferred Compensation Plan for Directors (incorporated by reference
to Exhibit 4.1 to the Company’s Form S-8 (File No. 333-205392), as filed with the U.S. Securities and Exchange
Commission on July 1, 2015).
The Chemours Company Senior Executive Severance Plan (incorporated by reference to Exhibit 10.20 to the company’s
Amendment No. 3 to Form 10, as filed with the U.S. Securities and Exchange Commission on May 13, 2015).
Form of Option Award Terms under the Company’s Equity Incentive Plan (incorporated by reference to Exhibit 10.21 to
the company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015).
Form of Restricted Stock Unit Terms under the Company’s Equity Incentive Plan (incorporated by reference to Exhibit
10.22 to the company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015).
Form of Stock Appreciation Right Terms under the Company’s Equity Incentive Plan (incorporated by reference to Exhibit
10.23 to the company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015).
Form of Restricted Stock Unit Terms for Non-Employee Directors under
the Company’s Equity Incentive Plan
(incorporated by reference to Exhibit 10.24 to the company’s Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2015).
Form of Performance-Based Restricted Stock Unit Terms for August 2015 (incorporated by reference to Exhibit 10.25 to
the company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015).
Form of Performance Share Unit Award Terms under the Company’s Equity Incentive Plan (incorporated by reference to
Exhibit 10.26 to the company’s Annual Report on Form 10-K for the year ended December 31, 2015).
Form of Cash Performance Award Terms under the Company’s Equity Incentive Plan (incorporated by reference to Exhibit
10.27 to the company’s Annual Report on Form 10-K for the year ended December 31, 2015).
Form of Indemnification Agreement for officers and directors (incorporated by reference to Exhibit 10.28 to the company’s
Annual Report on Form 10-K for the year ended December 31, 2015).
58
67
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DTP SB Hcho 8.25 x 10.75 (35) .25 HT
Exhibit
Number
10.29*
10.30
The Chemours Company
Description
Termination Agreement dated July 21, 2016 between Chemours International Operations Sarl and Thierry Vanlancker
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the U.S. Securities
and Exchange Commission on July 22, 2016).
Letter Agreement dated January 28, 2016 by and between The Chemours Company and E. I. du Pont de Nemours and
Company (incorporated by reference to Item 10.2 to the Company’s Current Report on Form 8-K, as filed with the U.S.
Securities and Exchange Commission on February 23, 2016).
10.31*
Form of Option Award Terms under the Company’s Equity Incentive Plan for grantees located in the U.S.
10.32*
Form of Option Award Terms under the Company’s Equity Incentive Plan for grantees located outside the U.S.
10.33*
10.34*
Form of Award Terms of Time-Vested Restricted Stock Units under the Company’s Equity Incentive Plan for grantees
located in the U.S.
Form of Award Terms of Time-Vested Restricted Stock Units under the Company’s Equity Incentive Plan for grantees
located outside the U.S.
The five sites listed above represent more than 50% of our reserve and we expect to spend, in aggregate, approximately $104 million
over the next three years. For all other sites, we expect to spend approximately $71 million over the next three years.
10.35*
Form of Award Terms of Performance Share Units under the Company’s Equity Incentive Plan.
Beaumont Works, Beaumont, Texas
12.1
Computation of Ratio of Earnings to Fixed Charges for the Company.
21
23
31.1
31.2
32.1
32.2
Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting Firm
Rule 13a-14(a)/15d-14(a) Certification of the Company’s Principal Executive Officer.
Rule 13a-14(a)/15d-14(a) Certification of the Company’s Principal Financial Officer.
Section 1350 Certification of the company’s Principal Executive Officer. The information contained in this Exhibit shall not
be deemed filed with the Securities and Exchange Commission nor incorporated by reference in any registration
statement filed by the registrant under the Securities Act of 1933, as amended.
Section 1350 Certification of the company’s Principal Financial Officer. The information contained in this Exhibit shall not
be deemed filed with the Securities and Exchange Commission nor incorporated by reference in any registration
statement filed by the registrant under the Securities Act of 1933, as amended.
95
Mine Safety Disclosures
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
*
Management contract or compensatory plan or arrangement.
The Chemours Company
While there are many remediation sites that contribute to the total environmental remediation accrual, the following sites are among the
most significant:
(Dollars in millions)
Beaumont, Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Chambers Works, New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
East Chicago, Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pompton Lakes, New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
USS Lead, East Chicago, Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
December 31,
2016
2015
12
24
20
77
21
124
278
$
12
20
19
87
15
144
297
Beaumont Works began operations in 1954 in Beaumont, Jefferson County, Texas. Over the years, Beaumont Works has produced a
number of basic chemicals and elastomer products including acrylonitrile, ammonia, methanol, methyl methacrylate, caprolactam,
Hypalon® synthetic rubber, Nordel® hydrocarbon rubber and blended tetraethyl
lead with halo-carbon solvent/stabilizers. As of
December 31, 2016, with sale of the aniline production unit to Dow in 2016, Chemours has no on-going manufacturing operations on
the site. Dow and Lucite remain as long-term manufacturing tenants.
As site owner, Chemours remains responsible for remediation of historical chemical releases from past operations and is conducting
this work under a RCRA hazardous waste post-closure permit and Compliance Plan (CP) issued by the State of Texas. The hazardous
waste permit includes provisions to manage wastes and to investigate and mitigate releases. The CP is a component of the permit and
includes mitigation and monitoring requirements, including a groundwater remediation system that was installed in 1991 to control
chemical migration and protect adjacent water bodies. In addition, several solid waste management unit closures have been conducted
and areas of past release addressed through interim measures to protect people and the environment. Over the years, extensive site
studies have been completed and a final investigation report (Affected Property Assessment Report, or APAR, under the Texas Risk
Reduction Program) for the entire site was approved by the State in 2014. Chemours is currently in the process of completing a
remedial action plan (RAP) that will address all remaining historical solid waste management units and areas of concern identified in
these studies, and expects to have this RAP approved in 2017.
The remediation accrual
for Beaumont addresses remaining work identified in the RAP under review by the State as well as
post-closure care and monitoring and on-going operation of
the groundwater remediation system. A portion of
the accrual also
addresses an outstanding Natural Resource Damage claim by state and federal trustees directed to impacts on marshlands within the
plant property.
Chambers Works, Deepwater, New Jersey
The Chambers Works complex is located on the eastern shore of the Delaware River in Deepwater, 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 former Carneys Point smokeless gunpowder plant was constructed at the northern end of Carneys
Point. Site operations began in the manufacturing area around 1914 and included the manufacture of dyes, aromatics, elastomers,
CFCs, and tetraethyl lead. Chemours continues 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.
Remaining work beyond continued operation of
the IWS and groundwater monitoring includes completion of a site perimeter
sheet pile barrier intended to more efficiently contain groundwater, completion of various targeted studies onsite and in adjacent water
68
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Our remediation portfolio is relatively mature, with many of our sites under active clean-up moving towards final completion. The below
graph illustrates the number of remediation sites by site clean-up phase, and the remediation reserve by site clean-up phase as of
December 31, 2016.
The Chemours Company
Remediation Sites by Phase
The Chemours Company
Index to the Consolidated Financial Statements
Management’s Report on Internal Control over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the years ended December 31, 2016, 2015 and 2014 . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2016, 2015 and 2014 . . . .
Consolidated Balance Sheets as of December 31, 2016 and 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2016, 2015 and 2014 . . . . . . . . . . .
Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014 . . . . . . . . . . . . . . . .
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
F-2
F-3
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$200
$180
$160
$140
$120
$100
$80
$60
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R
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$180
97
$62
18
25
37
$36
Investigation
Active Remediation
Ongoing Maintenance
& Monitoring
Number of Sites
Reserve ($ millions)
$0
Closed
1 The number of sites included in the chart do not include the 35 inactive sites where there has been no known investigation, clean-up or monitoring activity.
As remediation efforts progress, sites move from the investigation phase (Investigation) to the active clean-up phase, and as
construction is completed at active clean-ups (Active Remediation), those sites move to the ongoing maintenance and monitoring
(OM&M) or closure phase. As final clean-ups 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 clean-up) 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, diverse regulatory requirements, as well as the presence or
absence of other potentially responsible parties. In addition, for claims that Chemours may be required to indemnify DuPont pursuant to
the separation-related agreements, Chemours, through DuPont, has limited available information for certain sites or is in the early
stages of discussions with regulators. For these sites in particular 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 $535 million above the amount accrued at December 31, 2016. In general, uncertainty
is greatest and the range of potential liability is widest in the investigation phase, and narrows over time as regulatory agencies approve
site remedial plans, uncertainty is reduced and, ultimately, sites move into OM&M, where needed. As more sites advance from
investigation to active clean-up 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 on-going
monitoring and/or operations & maintenance of remedial systems. In addition, portfolio changes such as an acquisition or divestiture or
notification as a potentially responsible party for a multi-party Superfund site could result in additional remediation activity and
potentially additional accrual.
or settled over many years.
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, results of operations or cash flows at any given year, as such obligation can be satisfied
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1
The Chemours Company
Management’s Report on Internal Control over Financial Reporting
Environmental Remediation
The Chemours Company
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule
13a-15(f) under the Securities Exchange Act of 1934. The company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. The company’s internal control over financial reporting includes
those policies and procedures that:
i.
ii.
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made
only in accordance with authorization of management and directors of the company; and
iii.
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of the
company’s assets that could have a material effect on the financial statements.
Mainly because of past operations, operations of predecessor companies or past disposal practices, we, like many other similar
companies, have clean-up responsibilities, associated remediation costs and are subject to claims by other parties, including claims for
matters that are liabilities of DuPont and its subsidiaries that Chemours may be required to indemnify pursuant to the separation-related
agreements executed prior to the separation.
Chemours accrues for clean-up activities consistent with the policy as described in Note 3 to the Consolidated Financial Statements.
Our environmental reserve includes estimated costs 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 state, federal and foreign laws. These laws require certain investigative,
remediation and restoration activities at sites where Chemours conducts or once conducted operations or at sites where
Chemours-generated waste was disposed. At December 31, 2016 and 2015, we recorded environmental remediation accruals of $278
and $297 million, respectively, relating to these matters which, in management’s opinion, is appropriate based on existing facts and
circumstances. The following table summarizes the activities in our remediation accruals.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
(Dollars in millions)
Management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2016, based on
criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated
Framework (2013). Based on its assessment and those criteria, management concluded that the company maintained effective internal
control over financial reporting as of December 31, 2016.
PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of
internal control over financial reporting as of December 31, 2016, as stated in their report, which is presented on the following page.
the company’s
/s/ Mark P. Vergnano
Mark P. Vergnano
President and
Chief Executive Officer
February 17, 2017
/s/ Mark E. Newman
Mark E. Newman
Senior Vice President and
Chief Financial Officer
December 31,
2016
2015
Balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
297
$
Remediation payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in remediation accrual
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation adjustment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(63)
44
—
Balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
278
$
302
(43)
38
—
297
Our liability covered approximately 212 sites. The table below reflects our estimated environmental liability by site category:
Site Category
Chemours-owned(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multi-Party Superfund/Non-Owned(2)
. . . . . . . . . . . . . . . . . . . . . . . .
Closed or settled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
212
$
December 31, 2016
December 31, 2015
Number of
Remediation
Number of
Remediation
Sites
Accrual
Sites
Accrual
$
29
86
97
219
59
—
278
$
29
88
95
212
$
231
66
—
297
(1)
Includes remediation accrual of divested or sold sites where certain environmental obligations were retained by Chemours in
accordance with the related sale agreements.
(2) Sites not owned by Chemours, including sites previously owned by DuPont and sites owned by a third party where remediation
obligations are imposed by Superfund Law such as CERCLA or similar state laws.
As part of our legacy as a former subsidiary of DuPont, we are cleaning up historical
impacts to soil and groundwater that have
occurred in the past at the 29 sites that we own. These operating and former operating sites make up approximately 80% of our
remediation reserve.
In addition, we inherited numerous clean-up obligations from our DuPont legacy in approximately 86 sites. We are meeting our
obligations to clean-up those sites, including sites previously owned by DuPont and sites that Chemours or DuPont never owned or
operated. The majority of these never-owned sites are multi-party Superfund sites that Chemours, through DuPont, has been notified of
potential liability under CERCLA or similar state laws and which, in some cases, may represent a small fraction of the total waste that
was allegedly disposed of at a site. These sites represent approximately 20% of our remediation reserve. Included in the 86 is
approximately 35 inactive sites where there has been no known investigation, clean-up or monitoring activity and no remediation
obligation is imposed or required; as such, no remediation accrual is recorded.
The remaining approximately 97 sites, which are either multi-party Superfund sites and other sites not owned by Chemours, are already
closed, or settled, or for and which Chemours does not believe it has clean-up responsibility based on current information.
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The Chemours Company
Report of Independent Registered Public Accounting Firm
Expected long-term rate of return on assets is determined by performing a detailed analysis of historical and expected returns based
on the strategic asset allocation of the underlying asset class applicable to each country. We also consider our historical experience
with the pension fund asset performance. The expected long-term rate of return is an assumption and not what is expected to be
earned in any one particular year. The weighted average long-term rate of return assumption used for determining net periodic pension
expense for 2016 was 5.7%.
A 50 basis point increase in the discount rate would result in a decrease of approximately $6 million to the net periodic benefit cost for
2017, while a 50 basis point decrease in the discount rate would result in an increase of approximately $5 million. A 50 basis point
increase in the expected return on asset assumption would result in a decrease of approximately $6 million to the net periodic benefit
cost for 2017, while a 50 basis point decrease in the expected return on asset assumption would result in an increase of approximately
$6 million.
Prior to separation, certain of Chemours’ employees participated in defined benefit pension and other post-employment benefit plans
(the Plans) sponsored by DuPont and accounted for by DuPont in accordance with accounting guidance for defined benefit pension and
other post-employment benefit plans. Substantially all expenses related to these plans were allocated in shared entities and reported
within costs of goods sold, selling, general and administrative expenses and research and development expense in the Consolidated
Statements of Operations. Chemours considered all plans to be part of a multi-employer plan with DuPont prior to January 1, 2015.
In connection with the spin-off, Chemours retained the existing Netherlands pension plan and an agreement was executed in 2015 to
ensure continuance of the plan for both DuPont and Chemours employees and retirees. As a result of that agreement, Chemours now
accounts for the Netherlands plan as a multiple employer plan. Additionally, in 2015, Chemours formed new pension plans in Taiwan,
Germany, Belgium, Switzerland, Japan, Korea and Mexico that mirror the plans historically operated by DuPont in these countries. The
new plans are accounted for under the single employer method.
Environmental Matters
Consistent with our Chemours values and our Environment, Health and Safety (EHS) Policy, Chemours is 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. Chemours is 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 Expenses and Capital Expenditures
Chemours incurs costs for pollution abatement activities including waste collection and disposal, installation and maintenance of air
pollution controls and wastewater treatment, emissions testing and monitoring and obtaining permits. Annual expenses charged to
current operations include environmental operating costs and the increase in the remediation accrual (further described below), if any,
during the period reported. We expect expenses in 2017 will be comparable or within the historical range.
To the Board of Directors and Stockholders of The Chemours Company:
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial
position of The Chemours Company and its subsidiaries at December 31, 2016 and 2015, and the results of their operations and their
the three years in the period ended December 31, 2016 in conformity with accounting principles generally
cash flows for each of
accepted in the United States of America. In addition, in our opinion the financial statement schedule listed in the index appearing under
Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related
consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2016, based on criteria established in Internal Control — Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for
these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on
Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial
statement schedule, and on the Company’s internal control over financial reporting based on our audits (which was an integrated audit
in 2016). We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all
material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our audit of
internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Annual expenditures in the near future are also not expected to vary significantly from the expenditures incurred during the past few
years. However, longer term, expenditures are subject to considerable uncertainty and may fluctuate significantly. In the U.S., additional
capital expenditures are expected to be required over the next decade for treatment, storage and disposal facilities for solid and
hazardous waste and for compliance with the Clean Air Act (CAA). Until all CAA regulatory requirements are established and known,
considerable uncertainty will remain regarding estimates for future capital expenditures.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 17, 2017
For the years ended December 31, 2016 and 2015, Chemours spent approximately $13 million and $27 million, respectively, on
environmental capital projects either required by law or necessary to meet Chemours’ internal environmental objectives. We currently
estimate expenditures for environmental-related capital projects to be approximately $18 million in 2017, which will be funded by our
operating cash flows.
Management does not believe that the costs to comply with environmental requirements and the year over year changes, if any, in
environmental expenses will have a material impact on Chemours’ financial position, results of operations or cash flows.
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The Chemours Company
Consolidated Statements of Operations
(Dollars in millions, except per share)
Year Ended December 31,
indemnification of
these matters, including disputes based on matters of
law or contract interpretation. If and to the extent these
2016
2015
2014
disputes arise, they could materially adversely affect Chemours’ results of operations. Legal costs such as outside counsel fees and
matters that are liabilities of DuPont and its subsidiaries,
that Chemours may be required to indemnify pursuant
to the
separation-related agreements executed prior to the Distribution. Disputes between Chemours and DuPont may arise with respect to
The Chemours Company
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
5,400
$
5,717
$
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and asset related charges, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,290
1,110
934
80
170
—
4,762
955
632
97
333
25
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,184
1,087
Equity in earnings of affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Loss) income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Benefit from) provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Chemours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Per share data
Basic earnings (loss) per share of common stock . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings (loss) per share of common stock . . . . . . . . . . . . . . . . . . . . . . . .
Dividends per share of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29
(213)
247
(11)
(18)
7
—
7
0.04
0.04
0.12
$
$
$
$
22
(132)
54
(188)
(98)
(90)
—
$
$
$
$
(90) $
(0.50) $
(0.50) $
0.58
6,432
5,072
1,360
685
143
21
—
849
20
—
19
550
149
401
1
400
2.21(1)
2.21(1)
N/A
(1) On July 1, 2015, E. I. du Pont de Nemours and Company distributed 180,966,833 shares of Chemours’ common stock to holders
of its common stock. Basic and diluted earnings (loss) per common share for the year ended December 31, 2014 was calculated
using the shares distributed on July 1, 2015. Refer to Note 10 for information regarding the calculation of basic and diluted
earnings per share.
See accompanying notes to the consolidated financial statements.
expenses are charged to expense in the period services are received.
Income Taxes
The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this
approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities
are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus the change in
deferred taxes during the year. Deferred taxes result from differences between the financial and tax basis of Chemours’ assets and
liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to
reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. In evaluating the ability to realize
deferred tax assets, the Company relies on, in order of
increasing subjectivity, taxable income in prior carryback years, the future
reversals of existing taxable temporary differences, tax planning strategies and forecasted taxable income using historical and projected
future operating results.
The breadth of Chemours’ operations and the global complexity of tax regulations require assessments of uncertainties and judgments
in estimating the taxes that Chemours will ultimately pay. The final taxes paid are dependent upon many factors, including negotiations
with taxing authorities in various jurisdictions, outcomes of
tax litigation and resolution of disputes arising from federal, state and
international tax audits in the normal course of business. A liability for unrecognized tax benefits is recorded when management
concludes that the likelihood of sustaining such positions upon examination by taxing authorities is less than “more likely than not”. It is
Chemours’ policy to include accrued interest related to unrecognized tax benefits in other income, net and income tax related penalties
to be included in the provision for income taxes.
Prior to July 1, 2015, income taxes as presented herein attribute current and deferred income taxes of DuPont to Chemours’
stand-alone financial statements in a manner that is systematic, rational, and consistent with the asset and liability method prescribed
by Accounting Standards Codification 740, Income Taxes (ASC 740), issued by the Financial Accounting Standards Board (FASB).
Accordingly, Chemours’ income tax provision was prepared following the separate return method. The separate return method applies
ASC 740 to the stand-alone financial statements of each member of the consolidated group as if the group member were a separate
taxpayer and a stand-alone enterprise. As a result, actual tax transactions included in the consolidated financial statements of DuPont
may not be included in the separate combined financial statements of Chemours. Similarly, the tax treatment of certain items reflected
in the separate combined financial statements of Chemours may not be reflected in the consolidated financial statements and tax
returns of DuPont; therefore, such items as net operating losses, credit carryforwards, and valuation allowances may exist in the
stand-alone financial statements that may or may not exist in DuPont’s consolidated financial statements.
The taxable income (loss) of various Chemours entities, prior to July 1, 2015, was included in DuPont’s consolidated tax returns, where
applicable, in jurisdictions around the world. As such, separate income tax returns were not prepared for many Chemours’ entities.
Consequently, income taxes currently payable are deemed to have been remitted to DuPont, in cash, in the period the liability arose and
income taxes currently receivable are deemed to have been received from DuPont in the period that a refund could have been
recognized by Chemours had Chemours been a separate taxpayer. As described in Note 2 to the Consolidated Financial Statements,
the operations comprising Chemours are in various legal entities which have no direct ownership relationship. Consequently, no
provision has been made for income taxes on unremitted earnings of subsidiaries and affiliates. Unremitted earnings of subsidiaries
outside the U.S. are considered to be reinvested indefinitely.
Employee Benefits
The amounts recognized in the consolidated financial statements related to pension and other long-term employee benefits plans are
determined from actuarial valuations. Inherent in these valuations are assumptions including expected return on plan assets, discount
rates at which liabilities could have been settled, rate of increase in future compensation levels, and mortality rates. These assumptions
are updated annually and are disclosed in Note 22 to the Consolidated Financial Statements. In accordance with U.S. GAAP, actual
results that differed from the assumptions are accumulated and amortized over future periods and therefore, affect expense recognized
and obligations recorded in future periods.
Chemours generally utilizes discount rates that are developed by matching the expected cash flows of each benefit plan to various yield
curves constructed from a portfolio of high quality, fixed income instruments provided by the plan’s actuary as of the measurement date.
As of December 31, 2016, the weighted average discount rate was 1.8%.
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changes in management’s business strategy, indicate that there may be a probable indicator of impairment. It is possible that the
assumptions used by management related to the evaluation may change or that actual results may vary significantly from
The Chemours Company
The Chemours Company
Consolidated Statements of Comprehensive Income (Loss)
(Dollars in millions)
normal ongoing review of operations. Chemours evaluates the carrying value of long-lived assets to be held and used when events or
Net income (loss)
. . . . . . . . . . . . . . . . . . . . $
(11) $
18 $
7 $ (188) $
98 $
(90) $
550 $ (149) $
401
Year Ended December 31,
2016
2015
2014
Pre-Tax
Tax
After-
Tax
Pre-Tax
Tax
After-
Tax
Pre-Tax
Tax
After-
Tax
Other comprehensive income (loss):
Unrealized gain on net investment hedge . . .
Cumulative translation adjustments . . . . . . .
14
(73)
Defined benefit plans, net:
Net loss . . . . . . . . . . . . . . . . . . . . . . .
(17)
well as the time in which such impairments are recognized. In addition, Chemours continually reviews its diverse portfolio of assets to
Comprehensive (loss) income . . . . . . . . . . . .
Prior service credit . . . . . . . . . . . . . . . . .
Effect of foreign exchange rates . . . . . . . . .
Reclassifications to net income(1):
Amortization of prior service cost . . . . . . .
Amortization of loss . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . .
Curtailment gain . . . . . . . . . . . . . . . .
Defined benefit plans, net
. . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . . . . . .
—
15
(1)
23
5
(2)
23
(36)
(47)
Less: Comprehensive income attributable to
noncontrolling interests . . . . . . . . . . . . . . . .
—
Comprehensive (loss) income attributable to
—
—
5
—
(3)
—
(6)
(1)
—
(5)
(5)
13
—
14
(73)
8
(304)
(12)
(11)
—
12
(1)
17
4
(2)
18
(41)
(34)
24
33
4
16
—
—
66
(230)
(418)
—
—
1
(4)
(8)
—
(3)
—
—
(14)
(14)
84
8
(304)
(10)
20
25
4
13
—
—
52
(244)
(334)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
550
(149)
401
—
—
—
—
1
—
1
Environmental Liabilities and Expenditures
See accompanying notes to the consolidated financial statements.
Chemours . . . . . . . . . . . . . . . . . . . . . . . $
(47) $
13 $
(34) $ (418) $
84 $ (334) $
549 $ (149) $
400
(1) These other comprehensive income (loss) components are included in the computation of net periodic benefit costs.
Refer to Note 22 for further information.
management’s estimates.
Long-lived Assets
Assessment of potential impairment of property, plant and equipment and other intangible assets is an integral part of Chemours’
changes in circumstances indicate that the carrying value may not be recoverable. For purposes of recognition or measurement of an
impairment loss, the assessment is performed on the asset or asset group at the level for which identifiable cash flows are largely
independent of the cash flows of other groups of assets and liabilities. To determine the level at which the assessment is performed,
Chemours considers factors such as revenue dependency, shared costs and the extent of vertical integration. The carrying value of a
long-lived asset is considered impaired when the total projected undiscounted cash flows from the use and eventual disposition of asset
or asset group are less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value
exceeds the fair value of the long-lived asset. The fair value methodology used is an estimate of fair market value which is made based
on prices of similar assets or other valuation methodologies including present value techniques. Long-lived assets to be disposed of
other than by sale are classified as held for use until their disposal. Long-lived assets to be disposed of by sale are classified as held for
sale and are reported at the lower of carrying amount or fair market value less cost to sell. Depreciation is discontinued for long-lived
assets classified as held for sale.
Testing for potential impairment of these assets is significantly dependent on numerous assumptions and reflects management’s best
estimates at a particular point in time. The dynamic economic environments in which Chemours’ segments operate, and key economic
and business assumptions with respect to projected selling prices, market growth and inflation rates, can significantly affect the outcome
of
impairment tests. Estimates based on these assumptions may differ significantly from actual results. Changes in factors and
assumptions used in assessing potential impairments can have a significant impact on the existence and magnitude of impairments, as
ensure they are achieving their greatest potential and are aligned with Chemours’ growth strategy. Strategic decisions involving a
particular group of assets may trigger an assessment of the recoverability of the related assets. Such an assessment could result in
impairment losses. During 2016, Chemours recorded a $48 million pre-tax asset impairment of our Pascagoula Aniline facility, $58
million pre-tax asset impairment in connection with the sale of
the Sulfur business and $13 million pre-tax asset impairment in
connection with the sale of the Company’s corporate headquarters building. During 2015, Chemours recorded a $45 million pre-tax
asset impairment of the RMS facility. All charges, except for the corporate headquarters building impairment (which is recorded in
Corporate and Other), are recorded in the Chemical Solutions segment. Refer to Notes 7, 13 and 15 to the Consolidated Financial
Statements for additional information related to these charges.
Chemours accrues for remediation activities when it is probable that a liability has been incurred and a reasonable estimate of the
liability can be made. Where the available information is sufficient to estimate the amount of liability, that estimate has been used.
Where the information is only sufficient to establish a range of probable liability and no point within the range is more likely than any
other, the lower end of
the range has been used. Estimated liabilities are determined based upon existing remediation laws and
technologies.
Inherent uncertainties exist
in such evaluations primarily due to unknown environmental conditions, changing
governmental regulations and legal standards regarding liability, and emerging remediation technologies. These accruals are adjusted
periodically as remediation efforts progress and as additional technology, regulatory and legal information become available.
Environmental liabilities and expenditures include claims for matters that are liabilities of DuPont and its subsidiaries, that Chemours
may be required to indemnify pursuant to the separation-related agreements executed prior to the separation. Accrued liabilities are
undiscounted and do not include claims against third parties. These liabilities are included in “Other accrued liabilities” and “Other
liabilities” in the Consolidated Balance Sheet.
Costs related to environmental remediation are charged to expense in the period incurred, in “Cost of goods sold” of the Consolidated
Statement of Operations. Other environmental costs are also charged to expense in the period incurred, unless they increase the value
of the property or reduce or prevent contamination from future operations, in which case, they are capitalized and amortized.
Litigation
Chemours accrues for litigation matters when it is probable that a liability has been incurred and the amount of the liability can be
reasonably estimated. Litigation liabilities and expenditures included in the consolidated financial statements represent
litigation
52
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The Chemours Company
Consolidated Balance Sheets
(Dollars in millions, except per share amount)
(5) Due to uncertainty regarding the completion of
tax audits and possible outcomes, we are unable to determine the timing of
payments related to unrecognized tax benefits. See Note 9 to the Consolidated Financial Statements for additional information.
The Chemours Company
December 31,
2016
December 31,
2015
Off Balance Sheet Arrangements
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Accounts and notes receivable – trade, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net property, plant and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
902
807
767
77
2,553
7,997
(5,213)
2,784
170
136
417
366
859
972
104
2,301
9,015
(5,838)
3,177
176
136
508
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
6,060
$
6,298
and intangible assets,
long-term employee benefit obligations,
income taxes, restructuring liabilities, environmental matters, and
5
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Liabilities and equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
884
$
Short-term borrowings and current maturities of long-term debt
. . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingent liabilities
Equity
Common stock (par value $0.01 per share; 810,000,000 shares authorized; shares issued and
outstanding at December 31, 2016: 182,600,533 and 2015: 181,069,751)
. . . . . . . . . . . . . . .
Additional paid-in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Chemours stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15
872
1,771
3,529
132
524
5,956
2
789
(114)
(577)
100
4
104
973
39
454
1,466
3,915
234
553
6,168
2
775
(115)
(536)
126
4
130
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
6,060
$
6,298
See accompanying notes to the consolidated financial statements.
F-6
51
Information with respect to Chemours’ guarantees is included in Note 20 to the Consolidated Financial Statements. Historically,
Chemours has not made significant payments to satisfy guarantee obligations; however, Chemours believes it has the financial
resources to satisfy these guarantees in the event required.
See Note 3 to the Consolidated Financial Statements included elsewhere in this Annual Report for a summary of recent accounting
Recent Accounting Pronouncements
pronouncements.
Critical Accounting Policies and Estimates
Chemours’ significant accounting policies are more fully described in Note 3 to the Consolidated Financial Statements. Management
believes that the application of
these policies on a consistent basis enables the Company to provide the users of
the financial
statements with useful and reliable information about the Company’s operating results and financial condition.
The preparation of
the consolidated financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts, including, but not limited to, receivable and inventory valuations, impairment of tangible
litigation. Management’s estimates are based on historical experience, facts and circumstances available at the time and various other
assumptions that are believed to be reasonable. The Company reviews these matters and reflects changes in estimates as appropriate.
Management believes that the following represents some of the more critical judgment areas in the applications of the Company’s
accounting policies which could have a material effect on the Company’s financial position, results of operations or cash flows.
Goodwill
Goodwill is tested for impairment at least annually on October 1; however, impairment tests are performed more frequently when events
or changes in circumstances indicate that the asset may be impaired. Impairment exists when carrying value exceeds fair value.
Goodwill is evaluated for impairment at the reporting unit level, which is defined as one level below our operating segments with the
exception of Titanium Technologies, which is both an operating segment and a reporting unit. A reporting unit is the level at which
discrete financial information is available and reviewed by business management on a regular basis.
The Company evaluates goodwill for impairment using a two-step process. The first step is utilizing a discounted cash flow methodology
to calculate the fair value of its reporting units; and where market comparables are available, the Company includes EBITDA multiples
as part of the reporting unit valuation analysis. Key assumptions used in the discounted cash flows include projected cash flows, growth
rates, discount rates, tax rates and terminal values. Factors considered in developing cash flows and EBITDA projections include: 1)
macroeconomic conditions; 2) industry and market considerations; 3) costs of raw materials, labor or other costs having a negative
effect on earnings and cash flows; 4) overall financial performance; and 5) other relevant entity-specific events. The discount rate used
represents the weighted average cost of capital for the reporting units considering the risks and uncertainty inherent in the cash flows of
the reporting units and in the internally developed forecasts. The second step of the quantitative test is required if the first step of the
quantitative test indicates a potential impairment. The second step is performed by comparing the implied fair value of a reporting unit’s
goodwill with the carrying amount of its goodwill. If the carrying amount of goodwill is greater than its implied fair value, an impairment
loss is recorded.
Based on the evaluation performed in 2016, no impairment of goodwill was recorded as the estimated fair value of each reporting unit,
for which goodwill
is recorded, substantially exceeded the reporting unit’s carrying amount, indicating that none of the Company’s
goodwill was impaired. In 2015, in connection with the strategic evaluation of the Chemical Solutions portfolio and the resulting changes
to the reporting units in the third quarter of 2015, the Chemical Solutions segments recorded a $25 million pre-tax impairment charge
related to its Sulfur reporting unit. Sulfur reporting unit was disposed through the sale of its assets and business during 2016 (see Note
7 to the Consolidated Financial Statements for further details).
The determination of whether or not goodwill is impaired involves a significant level of judgment in the assumptions underlying the
approach used to determine the estimated fair value of our reporting units. Chemours believes that assumptions and rates used in the
impairment assessment are reasonable. However, these assumptions are judgmental and variations in any assumptions could result in
materially different calculations of fair value. The Company will continue to evaluate goodwill on an annual basis as of October 1,
and whenever events or changes in circumstances, such as significant adverse changes in operating results, market conditions or
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149996_85669 Chemours Company Annual Report_Text Signature 5 Side D Magenta
149996_85669 Chemours Company Annual Report_Text Signature 5 Side D RGS 1
149996_85669 Chemours Company Annual Report_Text Signature 5 Side D RGS 6
149996_85669 Chemours Company Annual Report_Text Signature 5 Side D RGS 2
149996_85669 Chemours Company Annual Report_Text Signature 5 Side D RGS 4
149996_85669 Chemours Company Annual Report_Text Signature 5 Side D RGS 5
149996_85669 Chemours Company Annual Report_Text Signature 5 Side D RGS 3
149996_85669 Chemours Company Annual Report_Text Signature 5 Side D Yellow
149996_85669 Chemours Company Annual Report_Text Signature 5 Side D Black
149996_85669 Chemours Company Annual Report_Text Signature 5 Side D Cyan
The Chemours Company
The following table summarizes ongoing and expansion capital expenditures (which includes environmental capital expenditures), as
well as expenditures related to our separation from DuPont, for the years ended December 31, 2016, 2015 and 2014:
(Dollars in millions)
Titanium Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
Fluoroproducts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chemical Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate & Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Capital Expenditures(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
338
$
519
$
Year Ended December 31,
2016
2015
2014
105
120
104
9
255
142
117
5
365
133
106
—
604
(1)
Includes separation-related capital expenditures of $66 million and $21 million for the years ended December 31, 2015 and 2014,
respectively.
Our capital expenditures, excluding separation-related spending, declined in 2016 as we finished the expansion of our Altamira
production facility. We expect our capital expenditures in 2017 to be at approximately $450 million driven in large part by expenditures
associated with our new Opteon™ plant under construction in Corpus Christi and our anticipated Mining Solutions expansion. We are
targeting to return to approximately $350 million of capital expenditures per year following the completion of the new facilities. For
further detail related to our environmental capital expenditures, please see the Environmental Matters section of this MD&A.
Contractual Obligations
Information related to the Company’s significant contractual obligations is summarized in the table below.
Total at
December 31,
2016
Payments Due In
2017
2018 – 2019
2020 – 2021
$
$
$
$
2022 and
Beyond
(Dollars in millions)
Long-term debt obligations(1) . . . . . . . . . . . . . . . . . . . .
$
Interest payments on long-term debt obligations(1) . . . . . .
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase obligations(2)
Raw material obligations . . . . . . . . . . . . . . . . . . . . .
Utility obligations . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total purchase obligations . . . . . . . . . . . . . . . . . . . . .
Other liabilities
Workers’ compensation . . . . . . . . . . . . . . . . . . . . . .
Asset retirement obligations . . . . . . . . . . . . . . . . . . .
Environmental remediation . . . . . . . . . . . . . . . . . . .
Legal settlements(3)
. . . . . . . . . . . . . . . . . . . . . . . .
Employee separation costs . . . . . . . . . . . . . . . . . . .
Other(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
3,588
1,339
259
1,244
673
341
2,258
36
43
278
348
34
56
795
15
200
62
97
98
89
284
6
2
71
337
31
29
476
30
398
99
153
143
128
424
15
2
104
4
3
4
132
30
396
55
144
129
87
360
7
—
55
4
—
4
70
3,513
345
43
850
303
37
1,190
8
39
48
3
—
19
117
5,208
(1) To calculate payments due for principal and interest, we assumed that interest rates, foreign currency exchange rates, and
outstanding borrowings under credit facilities were unchanged from December 31, 2016 through maturity.
(2) Represents enforceable and legally binding agreements to purchase goods or services that specify fixed or minimum quantities;
fixed minimum or variable price provisions; and the approximate timing of the agreement.
(3)
Includes $335 million litigation accrual related to the PFOA MDL Settlement (see Note 20 to the Consolidated Financial
Statements).
(4)
Includes expected contributions and benefits payments in excess of plan assets to be made to fund our pension and other
long-term employee benefit plans. Actual payments will depend on several factors, including investment performance and discount
rates, and may also be affected by changes in applicable local requirements. See Note 22 to the Consolidated Financial
Statements for additional information.
The Chemours Company
Consolidated Statements of Stockholders’ Equity
Years ended December 31, 2016, 2015 and 2014
(Dollars in millions)
Common Stock
Shares
Amount
DuPont
Company
Net
Investment
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interests
Accumulated
Deficit
Total
Balance at December 31, 2013 . . . . . .
— $
— $
3,195 $
— $
19 $
3 $
— $ 3,217
Net income . . . . . . . . . . . . . . . . . . .
Net transfers from DuPont
. . . . . . . . . .
Balance at December 31, 2014 . . . . . .
Net income (loss)
. . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . .
—
—
—
—
—
Issuance of common stock at
separation . . . . . . . . . . . . . . . . . . 180,966,833
Common stock issued – compensation
plans . . . . . . . . . . . . . . . . . . . . .
102,918
Establishment of pension plans, net and
related accumulated other
comprehensive income (loss) . . . . . . .
Dividends . . . . . . . . . . . . . . . . . . . .
Non-cash debt exchange . . . . . . . . . . .
Cash provided at separation by DuPont
. .
Net transfers to DuPont . . . . . . . . . . . .
Stock-based compensation expense . . . .
—
—
—
—
—
—
Balance at December 31, 2015 . . . . . . 181,069,751
Net income . . . . . . . . . . . . . . . . . . .
—
Common stock issued – compensation
plans . . . . . . . . . . . . . . . . . . . . .
583,859
Dividends . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . .
Stock-based compensation expense . . . .
—
—
—
Exercise of stock options . . . . . . . . . . .
946,923
—
—
—
—
—
2
—
—
—
—
—
—
—
2
—
—
—
—
—
—
400
55
3,650
25
—
—
—
268
(100)
(507)
247
(3,583)
—
—
—
—
—
—
—
—
—
—
—
—
—
(2)
—
—
(5)
—
—
769
13
775
—
—
(16)
—
19
11
—
—
19
—
(244)
—
—
(311)
—
—
—
—
—
(536)
—
—
—
(41)
—
—
1
—
4
—
—
—
—
—
—
—
—
—
—
4
—
—
—
—
—
—
—
—
401
55
— 3,673
(115)
(90)
—
(244)
—
—
—
—
—
—
—
(115)
7
—
(6)
—
—
—
—
—
(43)
(105)
(507)
247
(2,814)
13
130
7
—
(22)
(41)
19
11
Balance at December 31, 2016 . . . . . . 182,600,533 $
2 $
— $
789 $
(577) $
4 $
(114) $
104
Total contractual obligations(5) . . . . . . . . . . . . . . . . . . .
$
8,239
$
1,037
$
1,083
$
911
$
See accompanying notes to the consolidated financial statements.
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149996_85669 Chemours Company Annual Report_Text Signature 5 Side C Magenta
149996_85669 Chemours Company Annual Report_Text Signature 5 Side C RGS 6
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The Chemours Company
Consolidated Statements of Cash Flows
(Dollars in millions)
Operating activities
Net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
Amortization of deferred financing costs and issuance discount
Other operating charges and credits, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on sale of assets and businesses . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliates, net of dividends received of $18, $23 and $19 . . . . .
Deferred tax benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in operating assets:
Accounts and notes receivable – trade, net
. . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories and other operating assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in operating liabilities:
Accounts payable and other operating liabilities . . . . . . . . . . . . . . . . . . . . . . .
Cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of property, plant and equipment
Proceeds from sales of assets, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange contract settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash provided by (used for) investing activities . . . . . . . . . . . . . . . . . . . . . .
Financing activities
Proceeds from issuance of debt, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercised stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash provided at separation by DuPont
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net transfers (to) from DuPont
Cash (used for) provided by financing activities . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of year
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest, net of amounts capitalized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes, net of refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash change in property, plant and equipment included in accounts payable . . . . . .
Year Ended December 31,
2015
2014
2016
$
7
$
(90)
$
284
20
52
(254)
(12)
(111)
124
5
147
332
594
(338)
708
(12)
(1)
—
357
—
(381)
(22)
(4)
11
—
—
(396)
(19)
536
366
902
208
50
(12)
$
$
$
$
267
8
7
9
—
(198)
206
(64)
19
18
182
(519)
12
42
(32)
—
(497)
3,491
(10)
(105)
(79)
—
247
(2,857)
687
(6)
366
—
366
103
53
45
$
$
$
$
$
$
$
$
401
257
—
18
(40)
1
(22)
—
4
(29)
(85)
505
(604)
32
—
(8)
20
(560)
—
—
—
—
—
—
55
55
—
—
—
—
—
—
(11)
See accompanying notes to the consolidated financial statements.
The Chemours Company
warranties and events of default. The senior secured credit facilities and the senior unsecured notes contain events of default
customary for these types of
financings,
including cross default and cross acceleration provisions to material
indebtedness of
Chemours. We were in compliance with our debt covenants as of December 31, 2016.
In the event of default under the revolving credit facility, our lenders under the revolving credit facility can terminate their commitments
thereunder, cease making further revolving loans and accelerate outstanding revolving loans. This would allow the lenders under the
revolving credit facility to declare the outstanding term loans to be immediately due and payable and to institute foreclosure proceedings
against the collateral securing the credit facility, which could force us into bankruptcy or liquidation. Any event of default or declaration of
acceleration under the credit agreement also may result in an event of default under the indenture governing the notes. Any such
default, event of default or declaration of acceleration could materially and adversely affect our results of operations and financial
condition. Please see the section titled “Risks Related to our Indebtedness” of the “Risk Factors” section for additional detail.
Chemours has required principal payments related to the Term Loan Facility of $15 million in each year from 2017 to 2021, with the
remaining balance due at maturity. Debt maturities related to the Term Loan Facility and the Notes in 2022 and beyond will be $3,513
In addition, following the end of each fiscal year commencing on the year ended December 31, 2016, the Company is also required to
make additional principal repayments, depending on leverage levels as defined in the credit agreement, equivalent to up to 50% of
excess cash flow based on certain leverage targets with stepdowns to 25% and 0% as actual leverage decreases to below 3.00 to 1.00
In 2015, we entered into a global paying services agreement with a financial institution. Under this agreement, the financial institution
acts as the paying agent for Chemours with respect to accounts payable due to our suppliers who elect to participate in the program.
The agreement allows our suppliers to sell their receivables to the financial institution at the discretion of both parties on terms that are
negotiated between them. 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 December 31, 2016, the payment instructions from Chemours
were $134 million. Pursuant to their agreement with the financial
institution, certain suppliers may elect to get paid early at their
discretion. The available capacity under this program can vary based on the number of investors participating in this program at any
Maturities
million.
leverage target.
Supplier Financing
point of time.
Capital Expenditures
Our operations are capital intensive, requiring ongoing investment to upgrade or enhance existing operations and to meet environmental
and operational regulations. Our capital requirements have consisted, and are expected to continue to consist, primarily of:
•
•
•
ongoing capital expenditures, such as those required to maintain equipment reliability,
the integrity and safety of our
manufacturing sites and to comply with environmental regulations;
investments in our existing facilities to help support introduction of new products and de-bottleneck to expand capacity and
grow our business; and
investment in projects to reduce future operating costs and enhance productivity.
F-8
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149996_85669 Chemours Company Annual Report_Text Signature 5 Side B Magenta
149996_85669 Chemours Company Annual Report_Text Signature 5 Side B RGS 6
149996_85669 Chemours Company Annual Report_Text Signature 5 Side B RGS 5
149996_85669 Chemours Company Annual Report_Text Signature 5 Side B RGS 4
149996_85669 Chemours Company Annual Report_Text Signature 5 Side B RGS 3
149996_85669 Chemours Company Annual Report_Text Signature 5 Side B RGS 2
149996_85669 Chemours Company Annual Report_Text Signature 5 Side B RGS 1
149996_85669 Chemours Company Annual Report_Text Signature 5 Side B Yellow
149996_85669 Chemours Company Annual Report_Text Signature 5 Side B Black
149996_85669 Chemours Company Annual Report_Text Signature 5 Side B Cyan
April 12, 2016, and the exchange offer was completed on May 19, 2016. In addition, on May 5, 2016, the Euro Notes were listed for
trading on the Global Exchange Market of the Irish Stock Exchange.
The Chemours Company
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Each series of Notes is or will be fully and unconditionally guaranteed, jointly and severally, by Chemours’ existing and future domestic
Note 1. Background and Description of the Business
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subsidiaries that guarantee (the Guarantors) the Senior Secured Credit Facilities or that guarantee other indebtedness of Chemours or
any guarantor in an aggregate principal amount
in excess of $75 million (the Guarantees). The Notes are unsecured and
unsubordinated obligations of Chemours. The Guarantees are unsecured and unsubordinated obligations of the Guarantors. The Notes
rank equally in right of payment to all of Chemours’ existing and future unsecured unsubordinated debt and senior in right of payment to
all of Chemours’ existing and future debt that is by its terms expressly subordinated in right of payment to the Notes. The Notes are
subordinated to indebtedness under the Senior Secured Credit Facilities as well as any future secured debt to the extent of the value of
the assets securing such debt. Chemours’ is obligated to offer to purchase the Notes at a price of (a) 101 percent of their principal
amount, together with accrued and unpaid interest, if any, to the date of purchase, upon the occurrence of certain change of control
events and (b) 100 percent of their principal amount, together with accrued and unpaid interest, if any, to the date of purchase, with the
proceeds from certain asset dispositions. These restrictions and prohibitions are subject to certain qualifications and exceptions set
forth in the Indenture, including without limitation, reinvestment rights with respect to the proceeds of asset dispositions. Chemours is
permitted to redeem some or all of the 2023 Notes and Euro Notes by paying a “make-whole” premium prior to May 15, 2018, and on or
after May 15, 2018 and thereafter at specified redemption prices. Chemours also may redeem some or all of the 2025 Notes on or after
May 15, 2020 at specified redemption prices. Chemours also may redeem some or all of the 2023 Notes and Euro Notes by means
other than a redemption, including tender offer and open market repurchases.
Debt Covenants
Chemours is subject to certain debt covenants that, among other things, limit Chemours and certain of Chemours’ subsidiaries to incur
indebtedness, pay dividends or make other distributions, prepay, redeem or repurchase certain debt, make loans and investments, sell
assets, incur liens, enter into transactions with affiliates and consolidate or merge. These covenants are subject to a number of
exceptions and qualifications set forth in the respective agreements.
In December 2016, we entered into a third amendment to the credit agreement to change certain covenants and allow the Company to
enter into a sale and leaseback transaction for its corporate headquarters building located in Wilmington, Delaware. These transactions
are expected to be completed in the first quarter of 2017, and we expect to receive approximately $32 million proceeds. The
amendment requires us to use the proceeds from the sale to repay a portion of the term loans.
In February 2016, we proactively pursued a second amendment to the credit agreement in order to ensure that we would retain
adequate liquidity and sufficient cushion in the event of an unexpected, further significant decline in TiO2 pricing. The second
amendment also provided further flexibility by allowing us to include, on a pro forma basis, future benefits of cost savings initiatives in
the calculation of
financial covenants that rely on consolidated EBITDA for an additional year, and increased the amount of
the
applicable cost savings benefits that could be utilized in the covenant calculation. In addition, the second amendment replaced the total
net leverage ratio with the senior secured net leverage ratio and modified the minimum required levels of the interest expense coverage
ratio. These changes were designed to allow us to have full access to the revolving credit facility, provide flexibility to execute our
transformation plan through 2017 and provide additional cushion in the event of an unexpected, further significant decline in TiO2
pricing. Furthermore, the amendment reduced the size of the revolving credit facility by $250 million to $750 million. With the on-going
efforts to improve working capital usage as a part of our transformation plan, we believe that $750 million of revolver access will be
sufficient to meet our working capital and other cash needs over the next 12 months.
In September 2015, in connection with the Company’s transformation plan announced in August 2015, we undertook a first amendment
to the credit agreement to allow pro forma inclusion of
future benefits from cost savings initiatives in the calculation of
financial
covenants that rely on consolidated EBITDA beginning from the quarter ended September 30, 2015. Since the revolver availability in
any quarter is determined by the cushion remaining in the financial maintenance covenants at the end of the previous quarter, this
amendment increased our access to the revolving credit facility.
The credit agreement, as amended, contains financial covenants which, solely with respect to the revolving credit facility, require us
not to exceed a maximum senior secured net leverage ratio of 3.50 to 1.00 each quarter through December 31, 2016, 3.00 to 1.00
through June 30, 2017 and further decreasing by 0.25 to 1.00 every subsequent six months to 2.00 to 1.00 by January 1, 2019 and
thereafter. We are also required to maintain a minimum interest coverage ratio of 1.75 to 1.00 each quarter through June 30, 2017 and
further increasing by 0.25 to 1.00 every subsequent six months to 3.00 to 1.00 by January 1, 2019 and thereafter. In addition, the
credit agreement contains customary affirmative and negative covenants that, among other things,
limit or restrict us and our
subsidiaries’ ability, subject to certain exceptions, to incur liens, merge, consolidate or sell, transfer or lease assets, make investments,
pay dividends, transact with subsidiaries and incur indebtedness. The credit agreement also contains customary representations and
Chemours is globally operated with manufacturing facilities, sales centers, administrative offices and warehouses located throughout
the world. Chemours’ operations are primarily located in the United States (U.S.), Canada, Mexico, Brazil, the Netherlands, Belgium,
China, Taiwan, Japan, Switzerland, Singapore, Hong Kong, India and France. As of December 31, 2016, Chemours has 26 production
facilities globally, five dedicated to Titanium Technologies, 18 dedicated to Fluoroproducts, two dedicated to Chemical Solutions and one
that supports multiple Chemours segments.
Effective prior to the opening of trading on the New York Stock Exchange (NYSE) on July 1, 2015 (the Distribution Date), E. I. DuPont
the businesses comprising DuPont’s
de Nemours and Company (DuPont) completed the previously announced separation of
Performance Chemicals reporting segment, and certain other assets and liabilities, into Chemours, a separate and distinct public
company. The separation was completed by way of a distribution of all of the then-outstanding shares of common stock of Chemours
through a dividend in kind of Chemours’ common stock (par value $0.01) to holders of DuPont common stock (par value $0.30) as of
the close of business on June 23, 2015 (the Record Date) (the transaction referred to herein as the Distribution).
On the Distribution Date, each holder of DuPont’s common stock received one share of Chemours’ common stock for every five shares
of DuPont’s common stock held on the Record Date. The separation was completed pursuant to a separation agreement and other
agreements with DuPont, including an employee matters agreement, a tax matters agreement, a transition services agreement and an
intellectual property cross-license agreement. These agreements govern the relationship between Chemours and DuPont following the
separation and provided for the allocation of various assets,
liabilities, rights and obligations. These agreements also include
arrangements for transition services to be provided by DuPont to Chemours that were substantially completed during 2016.
Unless the context otherwise requires, references in these Notes to the Consolidated Financial Statements to “we”, “us”, “our”,
“Chemours” and the “Company” refer to The Chemours Company and its consolidated subsidiaries after giving effect to the Distribution.
Note 2. Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles
in the U.S. (GAAP). The notes that follow are an integral part of the consolidated financial statements.
Chemours did not operate as a separate, stand-alone entity for all periods included within these consolidated financial statements. Prior
to the separation on July 1, 2015, Chemours operations were included in DuPont’s financial results in different legal forms, including but
not limited to wholly-owned subsidiaries for which Chemours was the sole business, components of legal entities in which Chemours
operated in conjunction with other DuPont businesses and a majority owned joint venture. For periods prior to July 1, 2015, the
accompanying consolidated financial statements have been prepared from DuPont’s historical accounting records and are presented on
a stand-alone basis as if the business operations had been conducted independently from DuPont. Prior to January 1, 2015, aside from
a Japanese entity that is a dual-resident for U.S. federal income tax purposes, there was no direct ownership relationship among all the
other various legal entities comprising Chemours. Prior to July 1, 2015, DuPont and its subsidiaries’ net investments in these operations
is shown in lieu of Stockholders’ Equity in the consolidated financial statements. The consolidated financial statements include the
historical operations, assets and liabilities of the legal entities that are considered to comprise the Chemours business, including certain
environmental remediation and litigation obligations of DuPont and its subsidiaries that Chemours may be required to indemnify
pursuant to the separation-related agreements executed prior to the spin-off.
All of
the allocations and estimates in the consolidated financial statements prior to July 1, 2015 are based on assumptions that
management believes are reasonable. Therefore, the results of operations and cash flows prior to July 1, 2015 included herein may not
be indicative of the financial position, results of operations and cash flows of Chemours in the future or if Chemours had been a
separate, stand-alone entity during the periods presented.
48
F-9
industrial and specialty
The Chemours Company (Chemours or the Company) delivers customized solutions with a wide range of
industrial, mining and oil
chemical products for markets including plastics and coatings, refrigeration and air conditioning, general
refining. Principal products include titanium dioxide (TiO2),
resins, sodium cyanide and
performance chemicals & intermediates. Chemours consists of three reportable segments: Titanium Technologies, Fluoroproducts and
Chemical Solutions.
fluoropolymer
refrigerants,
industrial
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149996_85669 Chemours Company Annual Report_Text Signature 5 Side A Magenta
149996_85669 Chemours Company Annual Report_Text Signature 5 Side A RGS 6
149996_85669 Chemours Company Annual Report_Text Signature 5 Side A RGS 5
149996_85669 Chemours Company Annual Report_Text Signature 5 Side A RGS 2
149996_85669 Chemours Company Annual Report_Text Signature 5 Side A RGS 1
149996_85669 Chemours Company Annual Report_Text Signature 5 Side A RGS 4
149996_85669 Chemours Company Annual Report_Text Signature 5 Side A RGS 3
149996_85669 Chemours Company Annual Report_Text Signature 5 Side A Yellow
149996_85669 Chemours Company Annual Report_Text Signature 5 Side A Black
149996_85669 Chemours Company Annual Report_Text Signature 5 Side A Cyan
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
The net transfers from DuPont on the Consolidated Statements of Stockholders’ Equity include a non-cash contribution from DuPont of
$109 for the year ended December 31, 2015. This non-cash contribution occurred during physical separation activities at shared
production facilities in the U.S. prior to the separation and certain assets identified at separation. It was determined that assets
previously managed by other DuPont businesses would be transferred to and managed by Chemours.
Comprehensive income as of December 31, 2016 includes an out of period adjustment of $31 million relating to 2015 cumulative
translation adjustments with corresponding adjustment to other current assets. This adjustment is not material to the Company’s
consolidated financial statements taken as a whole.
Note 3. Summary of Significant Accounting Policies
These consolidated financial statements have been prepared in accordance with GAAP. The significant accounting policies described
below, together with the other notes that follow, are an integral part of the consolidated financial statements.
Preparation of Financial Statements
The preparation of
the consolidated financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and expenses, including allocations of costs as discussed
above, during the reporting period. Management’s estimates are based on historical experience, facts and circumstances available at
the time and various other assumptions that we believe are reasonable. Actual results could differ from those estimates.
Principles of Consolidation and Combination
The consolidated financial statements include the accounts Chemours and its subsidiaries, and entities in which a controlling interest is
maintained. For those consolidated subsidiaries in which the Company’s ownership is less than 100%, the outside shareholders’
interests are shown as noncontrolling interests. Investments in companies in which Chemours, directly or indirectly, owns 20% to 50% of
the voting stock or has the ability to exercise significant influence over operating and financial policies of the investee are accounting for
using the equity method of accounting. As a result, Chemours’ share of the earnings or losses of such equity affiliates is included in the
Consolidated Statements of Operations and Chemours’ share of such equity affiliates equity is included in the Consolidated Balance
Sheets.
The financial statements for the periods prior to the separation on July 1, 2015 include the combined assets, liabilities, revenues, and
the accompanying
expenses of Chemours. We eliminated all
consolidated financial statements.
intercompany accounts and transactions in the preparation of
Revenue Recognition
the agreement, when title and risk of
Revenue is recognized when the earnings process is complete. Revenue for product sales is recognized when products are shipped to
the customer in accordance with the terms of
loss have been transferred, collectability is
reasonably assured and pricing is fixed or determinable. Revenue associated with advance payments are recorded as deferred revenue
and are recognized as shipments are made and title, ownership and risk of loss pass to the customer. Accruals are made for sales
returns and other allowances based on historical experience. Cash sales incentives are accounted for as a reduction in sales and
noncash sales incentives are recorded as a charge to cost of goods sold at the time the revenue or selling expense, depending on the
nature of the incentive, is recorded. Amounts billed to customers for shipping and handling fees are included in net sales and costs
incurred by Chemours for the delivery of goods are classified as cost of goods sold in the Consolidated Statements of Operations.
Taxes on revenue-producing transactions are excluded from net sales. Licensing and royalty income is recognized in accordance with
agreed upon terms, when performance obligations are satisfied, the amount is fixed or determinable and collectability is reasonably
assured.
Cash and Cash Equivalents
Cash and cash equivalents generally include cash, time deposits or highly liquid investments with original maturities of three months or
less.
The Chemours Company
Current Liabilities
(Dollars in millions)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
884
$
Short-term borrowings and current portion of long-term debt . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15
872
973
39
454
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,771
$
1,466
December 31,
December 31,
2016
2015
Accounts payable decreased by $89 million compared to December 31, 2015 due to lower inventories and timing of payments to
vendors, as well as impact of divested businesses and favorable currency translation of approximately $20 million.
Other accrued liabilities increased primarily due to a $335 million litigation accrual related to the PFOA MDL Settlement. In addition, we
received advance payment from DuPont in February 2016 and approximately $58 million of this liability remains outstanding as of
December 31, 2016. Also, our performance related compensation accruals increased by approximately $42 million in line with the
improvements in our business results.
Credit Facilities and Notes
On May 12, 2015, Chemours entered into certain financing transactions in connection with the Distribution and in recognition of the
assets contributed to us by DuPont in anticipation of the separation. The proceeds from the financing transactions were used to fund a
cash distribution to DuPont of $3.4 billion and a distribution in kind of Notes with an aggregate principal amount of $507 million. See
Note 19 to the Consolidated Financial Statements for further discussion of these transactions.
The credit agreement provided for a seven-year senior secured term loan (the “Term Loan Facility”) in a principal amount of $1.5 billion
repayable in equal quarterly installments at a rate of one percent of the original principal amount per year, with the balance payable on
the final maturity date. The Term Loan Facility was issued with a $7 million original issue discount and bears interest at a rate of LIBOR
plus 3.00%, with a 0.75% LIBOR floor. The proceeds from the Term Loan Facility were used to fund a portion of the distribution to
DuPont, along with related fees and expenses.
Prior to an amendment in February 2016, the credit agreement also provided for a five-year $1.0 billion senior secured revolving credit
facility (the “Revolving Credit Facility”). In February 2016, an amendment to the Revolving Credit Facility reduced the capacity to $750
million beginning in the first quarter of 2016 and amended certain covenants (see Debt Covenants discussion included herein). The
proceeds of any loans made under the Revolving Credit Facility can be used to finance capital expenditures, acquisitions, working
capital needs and for other general corporate purposes. Availability under the Revolving Credit Facility is subject to certain covenant
limitations. At December 31, 2016, the facility had full borrowing capacity of $750 million, from which we have $132 million letters of
credit issued and outstanding under this facility.
Chemours’ obligations under the Term Loan Facility and Revolving Credit Facility (collectively, the Senior Secured Credit Facilities) are
guaranteed on a senior secured basis by all of
its material domestic subsidiaries, subject to certain agreed upon exceptions. The
obligations under the Senior Secured Credit Facilities are also, subject to certain agreed upon exceptions, secured by a first priority lien
on substantially all of Chemours and its material wholly-owned domestic subsidiaries’ assets, including 100% of the stock of domestic
subsidiaries and 65% of the stock of certain foreign subsidiaries.
Additionally, on May 12, 2015, Chemours issued approximately $2,503 million aggregate principal of senior unsecured notes (the
“Notes”) in a private placement. The 2023 notes (the “2023 Notes”) with an aggregate principal amount of $1,350 million bear
interest at a rate of 6.625% per annum and will mature on May 15, 2023 with all principal paid at maturity. The 2025 notes (the “2025
Notes”) with an aggregate principal amount of $750 million bear interest at a rate of 7.000% per annum and will mature on May 15,
2025 with all principal paid at maturity. The 2023 euro notes (the “Euro Notes”) with an aggregate principal amount of €360 million bear
interest at a rate of 6.125% per annum and will mature on May 15, 2023 with all principal paid at maturity. Interest on the Notes
is payable semi-annually in cash in arrears on May 15 and November 15 of each year, which commenced on November 15, 2015. The
Notes were offered in the U.S. to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the
Securities Act, and outside the U.S. to non-U.S. persons in reliance on Regulation S under the Securities Act. In connection with the
issuance of
the Notes, Chemours entered into a registration rights agreement, in which Chemours agreed to file with the SEC a
registration statement for the exchange of the Notes for new registered notes with identical terms. On March 18, 2016, Chemours
filed a registration statement on Form S-4 with respect to the exchange offer. The registration statement was declared effective on
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The Chemours Company
lower spending primarily from the completion of our Altamira plant expansion in April 2016 and no separation-related expenditures
incurred during 2016.
Cash used for investing activities decreased $63 million for the year ended December 31, 2015 compared to the same period in 2014
primarily as a result of a $85 million decrease in capital expenditures of which $80 million relates to the expansion of Titanium
Technologies’ Altamira plant in Mexico and approximately $50 million from other on-going and expansion activities, partially offset by
increase in separation-related capital expenditures of $45 million. In addition, we realized approximately $42 million of net gain from
foreign exchange contract settlements entered into in 2015 after the separation and no similar realized gains or losses were incurred
prior to the separation. The decreases in cash used for investing activities are partially offset by incremental investments made to our
unconsolidated affiliate in China and lower sales proceeds due to lesser business and asset sale activities during 2015.
Cash (Used for) Provided by Financing Activities
During 2016, utilizing our available cash, we repurchased and repaid a portion of our senior secured term loans with an aggregate
principal amount of $105 million for $104 million in cash, a portion of our 2023 Notes with an aggregate principal amount of $192
million for $182 million in cash, and a portion of our Euro Notes with an aggregate principal amount of $73 million for $68 million in
cash. These senior loan repurchases were in addition to our quarterly required repayments on the senior secured term loans equivalent
to 1% per annum of
its original principal. We also declared and paid approximately $22 million of dividends to our shareholders,
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Receivables and Allowance for Doubtful Accounts
Receivables are recognized net of an allowance for doubtful accounts. The allowance for doubtful accounts reflects the best estimate of
losses inherent in Chemours’ accounts receivable portfolio determined on the basis of historical experience, specific allowances for
known troubled accounts and other available evidence. Accounts receivable are written off when management determines that they are
uncollectible.
Inventories
Chemours’ inventories are valued at the lower of cost or market. Inventories held at substantially all U.S. locations are valued using the
last-in, first-out (LIFO) method. Inventories held outside the U.S. are determined by the average cost method. Elements of cost in
inventories include raw materials, direct labor, and manufacturing overhead. Stores and supplies are valued at cost or market, whichever
is lower; cost is generally determined by the average cost method. Approximately 48% and 54% of inventory is on a LIFO basis as of
December 31, 2016 and 2015, respectively. The remainder is accounted for using the average cost method.
equivalent to $0.12 per share.
Property, Plant and Equipment
Cash provided by financing activities increased by $632 million for the year ended December 31, 2015 compared to the same period in
2014, due primarily from the proceeds from our financing transactions offset by the net transfers to DuPont in connection with the
separation. Through June 30, 2015, DuPont managed Chemours’ cash and financing arrangements and all excess cash generated
through earnings was deemed remitted to DuPont and all sources of cash were deemed funded by DuPont. Prior to the separation on
July 1, 2015, Chemours remitted approximately $3.4 billion to DuPont in the form of a dividend, using cash received from issuance of
debt. See Note 4 to the Consolidated Financial Statements for additional information.
Property, plant and equipment is carried at cost and is depreciated using the straight-line method. Property, plant and equipment placed
in service prior to 1995 is depreciated under the sum-of-the-years’ digits method or other substantially similar methods. Substantially all
equipment and buildings are depreciated over useful lives ranging from 15 to 25 years. Capitalizable costs associated with computer
software for internal use are amortized on a straight-line basis over five to seven years. When assets are surrendered, retired, sold or
otherwise disposed of, their gross carrying values and related accumulated depreciation are removed from the balance sheet and
included in determining gain or loss on such disposals.
Repair and maintenance costs that materially add to the value of the asset or prolong its useful life are capitalized and depreciated
based on the extension to the useful life. Capitalized repair and maintenance costs are recorded on the Consolidated Balance Sheets in
“Other assets”.
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Goodwill and Other Intangible Assets
The excess of the purchase price over the estimated fair value of the net assets acquired, including identified intangibles, in a business
combination is recorded as goodwill. Goodwill is tested for impairment annually on October 1; however, these tests are performed more
frequently when events or changes in circumstances indicate that the asset may be impaired. Goodwill is evaluated for impairment at
the reporting unit level, which is defined as one level below operating segment except for Titanium Technologies, which is both an
operating segment and a reporting unit. A reporting unit is the level at which discrete financial information is available and reviewed by
business management on a regular basis. The Company utilizes an income approach (or discounted cash flow method) and market
approach to calculate the fair value of its reporting units.
Definite-lived intangible assets, such as purchased and licensed technology, patents, trademarks, and customer lists are amortized over
their estimated useful lives, generally for periods ranging from five to 20 years. The reasonableness of the useful lives of these assets is
continually evaluated.
$10 million of inventory write-down in the Chemical Solutions segment during 2016 as a result of the previously announced RMS
Impairment of Long-Lived Assets
Chemours evaluates the carrying value of long-lived assets to be held and used when events or changes in circumstances indicate the
carrying value may not be recoverable. For purposes of recognition or measurement of an impairment loss, the assessment is
performed on the asset or asset group at the lowest level for which identifiable cash flows are largely independent of the cash flows of
other groups of assets and liabilities. To determine the level at which the assessment is performed, Chemours considers factors such
as revenue dependency, shared costs and the extent of vertical integration.
The carrying value of a long-lived asset is considered impaired when the total projected undiscounted cash flows from the use and
eventual disposition of an asset or asset group are separately identifiable and are less than its carrying value. In that event, a loss is
the long-lived asset. The fair value
recognized based on the amount by which the carrying value exceeds the fair value of
methodology used is an estimate of fair market value which is made based on prices of similar assets or other valuation methodologies
including present value techniques. Long-lived assets to be disposed of other than by sale are classified as held for use until their
46
F-11
Current Assets
(Dollars in millions)
Accounts and notes receivable – trade, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2,553
$
2,301
December 31,
December 31,
2016
2015
902
807
767
77
366
859
972
104
Accounts and notes receivable — trade, net at December 31, 2016 decreased by $52 million compared to December 31, 2015 primarily
due to lower sales in the fourth quarter of 2016 over fourth quarter of 2015, including impact of divested businesses, $22 million of
accounts receivable disposed in connection with the sale of C&D and Sulfur businesses, and unfavorable currency translation of
approximately $2 million.
Inventories at December 31, 2016 decreased $205 million compared to December 31, 2015. The decrease was due to the continued
effort to reduce inventory on hand as well as due to the lower raw material and production costs. In addition, we recorded approximately
restructuring, and approximately $17 million of inventory disposed in connection with the sale of our aniline facility in Beaumont, Texas,
sale of C&D and Sulfur businesses, and approximately $23 million of unfavorable currency translation.
Prepaid expenses and other current assets at December 31, 2016 decreased compared to December 31, 2015 due to the sale of our
aniline facility in Beaumont, Texas in February 2016, which was previously classified as assets held-for-sale for approximately $46
million and included in this account as of December 31, 2015.
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
disposal. Long-lived assets to be disposed of by sale are classified as held for sale and are reported at the lower of carrying amount or
fair market value less cost to sell. Depreciation is discontinued for long-lived assets classified as held for sale.
Research and Development
Research and development costs are expensed as incurred. Research and development expenses include costs (primarily consisting of
employee costs, materials, contract services, research agreements, and other external spend) relating to the discovery and
development of new products, enhancement of existing products and regulatory approval of new and existing products.
Environmental Liabilities and Expenditures
Chemours accrues for remediation activities when it is probable that a liability has been incurred and a reasonable estimate of the
liability can be made. Where the available information is sufficient to estimate the amount of liability, that estimate has been used.
Where the information is only sufficient to establish a range of probable liability and no point within the range is more likely than any
other, the lower end of
the range has been used. Estimated liabilities are determined based upon existing remediation laws and
in such evaluations primarily due to unknown environmental conditions, changing
technologies.
governmental regulations and legal standards regarding liability, and emerging remediation technologies. These accruals are adjusted
periodically as remediation efforts progress and as additional technology, regulatory and legal information become available.
Inherent uncertainties exist
Environmental liabilities and expenditures included claims for matters that are liabilities of DuPont and its subsidiaries, that Chemours
may be required to indemnify pursuant to the separation-related agreements executed prior to the separation. Accrued liabilities are
undiscounted and do not include claims against third parties. These liabilities are included in “Other accrued liabilities” and “Other
liabilities” in the Consolidated Balance Sheet.
The Chemours Company
per share, which was paid on December 14, 2015 to our stockholders of record on November 13, 2015. During 2016, our board of
directors also declared quarterly dividends of $0.03 per share, which were paid in each quarter during the year.
The separation agreements set forth a process to true-up cash and working capital transferred to us from DuPont at separation. In
January 2016, Chemours and DuPont entered into an agreement, contingent upon the credit agreement amendment described herein,
which provided for the extinguishment of payment obligations of cash and working capital true-ups previously contemplated in the
separation agreements. As a result, Chemours was not required to make any payments to DuPont, nor did DuPont make any payments
to Chemours related to the separation true-up mechanism. In addition, the agreement set forth an advance payment of approximately
$190 million, which was paid to Chemours in February 2016, for certain specified goods and services that Chemours expects to provide
to DuPont through mid-2017 under existing agreements with Chemours. Approximately $58 million of the prepayment amount remained
outstanding as of December 31, 2016.
Over the next 12 months, Chemours expects to have significant interest, capital expenditure and restructuring payments. We expect to
fund these payments through cash generated from operations, available cash and borrowings under the revolving credit facility. We
anticipate that our operations and debt financing arrangements will provide sufficient liquidity over the next 12 months. The availability
under our Revolving Credit Facility is subject to the last 12 months of our consolidated EBITDA as defined under the credit agreement.
As of December 31, 2016 and 2015, we had $678 million and $271 million, respectively, of cash and cash equivalents on our balance
sheet held by our foreign subsidiaries, all of which is readily convertible into currencies used in our operations, including the U.S. dollar.
Cash and earnings of our foreign subsidiaries are generally used to finance their operations and capital expenditures. At December 31,
2016 and 2015, management believed that sufficient liquidity was available in the United States, and it is our intention to indefinitely
reinvest undistributed earnings of our foreign subsidiaries outside of the United States. No deferred tax liabilities have been recognized
with regard to the approximately $678 million and $271 million of cash of our foreign subsidiaries as of December 31, 2016 and 2015,
respectively, and undistributed earnings. The potential tax implications of the repatriation of unremitted earnings are driven by facts at
the time of distribution, therefore, it is not practicable to estimate the income tax liabilities that might be incurred if such cash and
earnings were repatriated to the United States.
Costs related to environmental remediation are charged to expense in the period incurred, in “Cost of goods sold” of the Consolidated
Statement of Operations. Other environmental costs are also charged to expense in the period incurred, unless they increase the value
of the property or reduce or prevent contamination from future operations, in which case they are capitalized and amortized.
Cash Flow
Asset Retirement Obligations
Chemours records asset retirement obligations at fair value at the time the liability is incurred. Fair value is measured using expected
future cash outflows discounted at Chemours’ credit-adjusted risk-free interest rate, which are considered level 3 inputs. Accretion
expense is recognized as an operating expense classified within cost of goods sold on the Consolidated Income Statements using the
credit-adjusted risk-free interest rate in effect when the liability was recognized. The associated asset retirement obligations are
capitalized as part of the carrying amount of the long-lived asset and depreciated over the estimated remaining useful life of the asset,
generally for periods ranging from two to 25 years.
Litigation
Chemours accrues for litigation matters when it is probable that a liability has been incurred and the amount of the liability can be
reasonably estimated. Litigation liabilities and expenditures included in the consolidated financial statements represent litigation matters
that are liabilities of DuPont and its subsidiaries, that Chemours may be required to indemnify pursuant to the separation-related
agreements executed prior to the separation. Legal costs such as outside counsel fees and expenses are charged to expense in the
period services are received.
Insurance
Chemours insures certain risks where permitted by law or regulation, including workers’ compensation, vehicle liability and employee
related benefits. Liabilities associated with these risks are estimated in part by considering historical claims experience, demographic
factors and other actuarial assumptions. For other risks, the Company uses a combination of insurance and self-insurance, reflecting
comprehensive reviews of relevant risks. A receivable for an insurance recovery is generally recognized when the loss has occurred
and collection is considered probable.
Prior to the separation, Chemours was a participant
in DuPont’s self-insurance program where permitted by law or regulation,
including workers’ compensation, vehicle liability and employee related benefits. Liabilities associated with these risks are estimated
in part by considering historical claims experience, demographic factors, and other actuarial assumptions. For other risks, a
The following table sets forth a summary of the net cash provided by (used for) operating, investing and financing activities.
(Dollars in millions)
Cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
182
$
Cash provided by (used for) investing activities . . . . . . . . . . . . . . . . . .
Cash (used for) provided by financing activities . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2016
2015
2014
594
357
(396)
(497)
687
505
(560)
55
Cash Provided by Operating Activities
Cash provided by operating activities improved by $412 million for the year ended December 31, 2016 compared to the same period in
2015, due primarily to overall
improvements in the results of operations and working capital. In addition, we received an advance
payment of $190 million from DuPont in February 2016 of which approximately $132 million was utilized during the year ended
December 31, 2016. Partially offsetting these increases are interest payments in 2016 of approximately $220 million versus
approximately $122 million in 2015, and restructuring payments of approximately $68 million in 2016 versus $39 million in 2015.
Cash provided by operating activities decreased by $323 million for the year ended December 31, 2015 compared with the same period
in 2014, due to lower earnings than the prior year, payments on restructuring activities and interest payments on our 2015 financing
transactions.
Cash Provided by (Used for) Investing Activities
Cash provided by investing activities the year ended December 31, 2016 includes the $140 million proceeds from the sale of our
aniline facility in Beaumont, Texas, $321 million net proceeds from the sale of the Sulfur business and $223 million net proceeds from
the sale of
the C&D business (see Note 7 to the Consolidated Financial Statements for additional details), as well as $22 million
proceeds from a sale of land in Repauno, New Jersey. These cash inflows were offset by capital expenditures during the period of
$338 million. Our capital expenditures decreased by approximately $181 million when compared to the same period in 2015 due to
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The Chemours Company
Adjusted EBITDA and Adjusted EBITDA margin increased during the year ended December 31, 2016 in comparison with same period in
2015. Despite the decreases in net sales, Adjusted EBITDA and Adjusted EBITDA margin increased due primarily to the cost reduction
efforts, including the global headcount reductions implemented in 2015, and improvement in plant operating costs.
2015 versus 2014: Net sales decreased by $73 million or 6%, for the year ended December 31, 2015 compared with the same period
in 2014, primarily due to lower prices based on contractual pass-through terms, changes in the mix of products sold as well as the
unfavorable impact of foreign currency exchange rates including the Mexican peso, Canadian dollar and the Euro. These decreases
were partially offset by volume increases in cyanide and sulfur due to strong demand.
Adjusted EBITDA and Adjusted EBITDA margin increased during the year ended December 31, 2015 in comparison with same period in
2014. The slight increase in Adjusted EBITDA was driven primarily by lower R&D expense and cost reduction efforts, including the
global headcount reductions, during the second half of 2015.
2017 Outlook
reductions, and procurement and productivity enhancements, and additional actions that may be taken in 2017. Based on our
anticipated cost reduction and growth initiatives, we continue to expect cost savings of approximately $350 million and approximately
$150 million in improvements from growth initiatives that together will also improve our pre-tax earnings by similar amounts through
2017 over 2015. These improvements will be partially offset by the impact of divestitures completed during 2016, unfavorable price and
mix of fluoropolymer products, and may also be impacted by market factors.
For 2017, we believe that those cost reductions from our transformation plan, along with growth from Opteon™, an improving pricing
environment
for TiO2, and the benefits of our newest
line at our Altamira facility will be partially offset by headwinds in our
Fluoroproducts segment and EBITDA lost
from divestitures. Therefore, we expect our Adjusted EBITDA to be in line with our
transformation plan goals. We expect our capital expenditures to be at approximately $450 million driven in large part by expenditures
associated with our new Opteon™ plant under construction in Corpus Christi and our anticipated Mining Solutions expansion. Our
outlook reflects our current visibility and expectations on market factors, such as currency movements, TiO2 pricing and end-market
Liquidity and Capital Resources
demand.
the year.
Prior to the separation on July 1, 2015, transfers of cash to and from DuPont’s cash management system were reflected in DuPont
Company Net Investment in the historical Consolidated Balance Sheets, Statements of Cash Flows and Statements of Changes in
DuPont Company Net Investment. DuPont funded our cash needs through the date of the separation. Chemours has a historical pattern
of seasonality, with working capital use of cash in the first half of the year, and a working capital source of cash in the second half of
Chemours’ primary source of
liquidity is cash generated from operations, available cash and borrowings under the debt financing
arrangements as described below. We believe these sources are sufficient to fund our planned operations and to meet our interest,
dividend and contractual obligations. Our financial policy seeks to deleverage by using free cash flow to repay outstanding borrowings,
selectively invest for growth to enhance our portfolio including certain strategic capital investments, and return cash to shareholders
through dividend payments.
Chemours’ operating cash flow generation is driven by, among other things, global economic conditions generally and the resulting
impact on demand for our products, raw material and energy prices, and industry-specific issues, such as production capacity and
utilization. Chemours has generated strong operating cash flow through various industry and economic cycles evidencing the operating
strength of our businesses. Over the industry cycles in recent years, cash flows from operating activities increased in years leading up
to the historical peak profitability achieved in 2011, and have decreased annually since that time. Despite the challenging market
conditions in the TiO2 industry since the historical peak, we anticipate that through our cost reduction efforts and growth initiatives, our
operations will provide sufficient liquidity to implement the transformation plan and support cash needs for the business.
While we were a wholly-owned subsidiary of DuPont, our then-board of directors, consisting of DuPont employees, declared a
dividend of an aggregate amount of $100 million for the third quarter of 2015, which was paid on September 11, 2015 to our
stockholders of record as of August 3, 2015. On September 1, 2015, our independent board of directors declared a dividend of $0.03
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
combination of insurance and self-insurance is used, reflecting comprehensive reviews of relevant risks. The annual cost was allocated
to all of the participating businesses using methodologies deemed reasonable by management. All obligations pursuant to these plans
have historically been obligations of DuPont. As such, these obligations were not included in the Consolidated Balance Sheets, with the
exception of self-insurance liabilities related to workers compensation, vehicle liability and employee related benefits.
Defined Benefit Plans
We have defined benefit plans covering certain of our employees outside the U.S., which are generally required by local regulations.
The benefits, which primarily relate to pension, are accrued over the employees’ service periods. We use actuarial methods and
assumptions in the valuation of defined benefit obligations and the determination of net periodic pension income or expense.
Differences between actual and expected results or changes in the value of defined benefit obligations and plan assets, if any, are not
recognized in earnings as they occur but rather systematically over subsequent periods.
With our transformation plan on track, we are targeting an additional $150 million of structural costs reductions in 2017. These cost
savings are expected to be generated from a combination of actions taken during 2016, including facilities closures, headcount
Stock-based Compensation
Chemours’ stock-based compensation consists of stock options, restricted share units (RSUs) and performance share units (PSUs) to
employees and non-employee directors. Stock options are measured at fair value on the grant date or date of modification, as
applicable. We recognize compensation expense on a straight-line basis over the requisite service period. The number of awards
ultimately expected to vest is determined by use of an estimated forfeiture rate. The estimated forfeiture rate is based on historical data
for the employee group awarded options and expected employee turnover rates, which management reevaluates each period.
Income Taxes
The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this
approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities
are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus the change in
deferred taxes during the year. Deferred taxes result from differences between the financial and tax basis of Chemours’ assets and
liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to
reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.
Chemours recognizes income tax positions that meet the more likely than not threshold and accrues interest related to unrecognized
income tax positions, which is included in other income, net in our Consolidated Statements of Operations. Income tax related penalties
are included in the provision for income taxes.
Chemours does not provide for income taxes on undistributed earnings of all foreign subsidiaries that are intended to be indefinitely
reinvested.
Prior to separation, income taxes presented attributed current and deferred income taxes of DuPont to Chemours’ stand-alone financial
statements in a manner that is systematic, rational, and consistent with the asset and liability method prescribed by ASC 740, Income
Taxes (ASC 740). Accordingly, Chemours’ income tax provision was prepared following the separate return method. The separate return
method applies ASC 740 to the stand-alone financial statements of each member of the consolidated group as if the group member
were a separate taxpayer and a stand-alone enterprise.
Foreign Currency Translation
Chemours identifies its separate and distinct foreign entities and groups them into two categories: (1) extensions of the parent (U.S.
dollar functional currency) and (2) self-contained (local functional currency). If a foreign entity does not align with either category,
factors are evaluated and a judgment is made to determine the functional currency. Chemours changes the functional currency of its
separate and distinct foreign entities only when significant changes in economic facts and circumstances indicate clearly that the
functional currency has changed.
During the periods covered by the consolidated financial statements, part of the Chemours business operated within foreign entities.
For foreign entities where the U.S. dollar is the functional currency, all foreign currency-denominated asset and liability amounts are
remeasured into U.S. dollars at end-of-period exchange rates, except for inventories; prepaid expenses; property, plant and equipment;
goodwill and other intangible assets, which are remeasured at historical rates. Foreign currency-denominated income and expenses are
remeasured at average exchange rates in effect during the period, except for expenses related to balance sheet amounts remeasured
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Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
at historical exchange rates. Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets
and liabilities are included in other income, net in the period in which they occur.
For foreign entities where the local currency is the functional currency, assets and liabilities denominated in local currencies are
translated into U.S. dollars at end-of-period exchange rates and the resulting translation adjustments are reported as a component of
accumulated other comprehensive (loss) income in equity. Assets and liabilities denominated in other than the functional currency are
remeasured into the functional currency prior to translation into U.S. dollars and the resulting exchange gains or losses are included in
income in the period in which they occur. Income and expenses are translated into U.S. dollars at average exchange rates in effect
during the period.
Beginning in 2015, when the Chemours operations were legally and operationally separated within DuPont in anticipation of
separation, certain of Chemours foreign entities set their local currency as the functional currency.
the
Derivatives
Chemours enters into forward currency exchange contracts to minimize volatility in earnings related to the foreign exchange gains and
losses resulting from remeasuring net monetary assets that Chemours holds which are denominated in non-functional currencies.
Chemours does not hold or issue financial instruments for speculative or trading purposes. The derivative assets and liabilities are
reported on a gross basis in the Consolidated Balance Sheets. All gains and losses resulting from the revaluation of the derivative
assets and liabilities are recognized in other income, net in the Consolidated Statements of Operations during the period in which they
occurred. Please refer to Note 21 for additional information.
Fair Value Measurement
Under the accounting for fair value measurements and disclosures, a fair value hierarchy was established that prioritizes the inputs to
valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets
for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). A
financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value
measurement.
Chemours uses the following valuation techniques to measure fair value for its assets and liabilities:
(a) Level 1 — Quoted market prices in active markets for identical assets and liabilities;
(b) Level 2 — Significant other observable inputs (e.g. quoted prices for similar items in active markets, quoted prices for identical
or similar items in markets that are not active, inputs other than quoted prices that are observable, such as interest rate and
yield curves, and market-corroborated inputs); and
(c) Level 3 — Unobservable inputs for the asset or liability, which are valued based on management’s estimates of assumptions
that market participants would use in pricing the asset or liability.
Recent Accounting Pronouncements
Accounting Guidance Issued Not Yet Adopted
In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, “Revenue from Contracts with Customers
(Topic 606).” The objective of this standard update is to remove inconsistent practices with regard to revenue recognition between US
GAAP and IFRS. The standard intends to improve comparability of revenue recognition practices across entities, industries, jurisdictions
and capital markets. The provisions of ASU No. 2014-09 will be effective for interim and annual periods beginning after December 15,
2017, with early adoption permitted for annual periods beginning after December 15, 2016. The Company plans to adopt ASU 2014-09
as of January 1, 2018. Subsequent to the issuance of ASU No. 2014-09, the FASB has issued multiple updates in connection with
Topic 606. These updates affect the guidance contained within ASU 2014-09 and will be assessed as part of the Company’s revenue
recognition project plan.
The Chemours Company
Change in segment net sales from prior period
Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Portfolio/Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2016
2015
(1)%
4%
(1)%
(1)%
1%
2%
—%
(4)%
(2)%
(4)%
2016 versus 2015: Net sales increased $34 million or 2% for the year ended December 31, 2016 compared with the same period in
2015. Stronger demand for Opteon™ refrigerant in both Europe and the United States delivered a significant increase in volume over
the prior year, partially offset by lower volume over the prior year due to the phase down of HCFCs refrigerants (i.e., Freon™) as
stipulated by the Montreal Protocol and by lower selling prices for fluoropolymer products due to competitive pricing pressure. For the
year ended December 31, 2016, unfavorable foreign currency impact, primarily against the Euro, Brazilian real and Mexican peso
resulted in an overall decrease in net sales.
Adjusted EBITDA increased by $145 million or 48% for the year ended December 31, 2016 in comparison with same periods in 2015,
due primarily to margin improvements and cost reductions from cost savings initiatives. Margin improvement from fluorochemicals sales,
including growth in Opteon™ but excluding currency impact, contributed an increase of approximately 41% in the year ended
December 31, 2016, and other cost reduction initiatives contributed an increase of approximately 20% for the year ended December 31,
2016. In addition, we incurred approximately $22 million or approximately 7% of costs in 2015 due to plant outages in certain of our
manufacturing facilities in the United States that did not recur in 2016. These improvements were partially offset by lower selling price
and unfavorable product mix of fluoropolymers, and higher performance related compensation accruals. Overall unfavorable currency in
the year ended December 31, 2016 also resulted in a decrease in adjusted EBITDA by approximately 6%.
2015 versus 2014: Net sales decreased by $97 million or 4% for the year ended December 31, 2015 compared with the same period
in 2014. Net sales were unfavorably impacted by foreign currency exchange rates, primarily related to the Euro, Brazilian real, and
Japanese yen, and continued weaker demand for industrial resins. Favorable product mix with strong Opteon™ refrigerant adoption
delivered increased prices and steady overall volumes over the prior year.
Adjusted EBITDA and adjusted EBITDA margin increased during the year ended December 31, 2015 in comparison with the same
periods in 2014. Both increases were primarily due to product mix and cost reduction efforts including global headcount reductions
during the second half of 2015.
Chemical Solutions
(Dollars in millions)
Year Ended December 31,
2016
2015
2014
Segment Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
772
$
1,095
$
1,168
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39
5%
29
3%
17
1%
Change in segment net sales from prior period
Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Portfolio/Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7)%
(3)%
—%
(19)%
(29)%
(5)%
2%
(3)%
—%
(6)%
Year Ended December 31,
2016
2015
2016 versus 2015: Net sales decreased by $323 million or 29% for the year ended December 31, 2016 compared with the same
period in 2015. These decreases were due to a portfolio change resulting from the sale of our aniline facility in Beaumont, Texas, our
C&D business and our Sulfur business, and the impact of RMS plant shutdown in September 2016. In addition, sales decreased due to
lower selling prices resulting from the impact of lower raw materials costs on contractual pass-through terms, and lower sales volume
substantially across all business units during the year except Sulfur.
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A reconciliation of Adjusted EBITDA to net income (loss) for the years ended December 31, 2016, 2015 and 2014 is included in
Non-GAAP Financial Measures in Item 7 and in Note 24 to the Consolidated Financial Statements.
The Chemours Company
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
The Company’s project plan includes a three-phase approach to implementing this standard update. Phase one, the assessment phase,
is currently in process and is expected to be completed in the second quarter of 2017. In connection with this initial phase, the
Company is currently performing the following activities: conducting internal surveys of
its businesses to initially identify a set of
applicable revenue recognition changes related to the new standard update, holding revenue recognition workshops with sales and
business unit finance leadership highlighting the impacts of the new standard update, and reviewing a representative sample of revenue
arrangements across all businesses to assess and validate the impact of the new guidance. Once completed, the Company will pursue
the second phase of the project, where the objectives will be to establish and document key accounting policies, assess disclosure,
business process and control impacts, and determine an initial quantitative impact resulting from the new standard update. Lastly, phase
three’s objectives will comprise of effectively implementing the new standard update and embedding the new accounting treatment into
the Company’s business processes and controls to support the financial reporting requirements.
The Company is still evaluating the impact that the new standard update will have on the Company’s consolidated financial statements
and will be unable to quantify its impact until the third phase of the project has been completed. The method of adoption has not yet
been determined and is also not expected to be finalized until the third phase of the project plan has been completed.
In January 2017, the FASB issued ASU No. 2017-04, “Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill
Impairment”, which eliminates the requirement to determine the fair value of
individual assets and liabilities of a reporting unit to
measure goodwill impairment. Under the amendments, goodwill impairment testing will be performed by comparing the fair value of the
reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the
reporting unit’s fair value, but not to exceed the total amount of goodwill allocated to the reporting unit. The guidance is effective for
annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and should be applied on a prospective
basis. Early adoption is permitted for annual or interim goodwill impairment testing performed after January 1, 2017. The Company
plans to adopt this guidance in 2017.
In August 2016, the FASB issued various updates to the Accounting Standards Update (ASU) 2016-15, “Statement of Cash Flows
(Topic 230): Classification of Certain Cash Receipts and Cash Payments”, which clarifies and amends certain cash receipts and cash
payments presentation and classification in the statement of cash flows. The guidance is effective for public business entities for fiscal
years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments should be applied using a
retrospective transition method (unless impractical to do so) to each period presented and earlier application is permitted. Chemours is
currently evaluating the impact of adopting this guidance but does not expect the adoption will have a significant impact on its cash
flows.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which supersedes the leases requirements in Topic 840.
The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases in accordance with
those lease assets and lease
FASB Concepts Statement No. 6, Elements of Financial Statements, and, therefore, recognition of
liabilities represents an improvement over previous GAAP, which did not require lease assets and lease liabilities to be recognized for
most
leases. A qualitative disclosure along with specific quantitative disclosures is required to provide enough information to
supplement the amounts recorded in the financial statements so that users can understand more about the nature of an entity’s leasing
activities. Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a
modified retrospective approach, which includes a number of optional practical expedients that entities may elect to apply. The
amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal
years. Early application of the amendments in this update is permitted for all entities. Chemours is currently evaluating the impact of
adopting this guidance on its financial position, results of operations and debt covenants.
Recently Adopted Accounting Guidance
Titanium Technologies
(Dollars in millions)
Year Ended December 31,
2016
2015
2014
Segment Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2,364
$
2,392
$
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
466
20%
326
14%
Change in segment net sales from prior period
Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Portfolio/Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3)%
2%
—%
—%
(1)%
Year Ended December 31,
2016
2015
2,937
723
25%
(12)%
(2)%
(5)%
—%
(19)%
2016 versus 2015: Net sales decreased by $28 million or 1% for the year ended December 31, 2016 compared with the same period
in 2015. The decrease in net sales was primarily due to lower average selling prices for TiO2 year over year, partially offset by an
increase in TiO2 sales volume due to higher demand in Europe and the United States. Our sales volume in 2016 was in line with
seasonal and historical trends.
Adjusted EBITDA increased by $140 million or 43% during the year ended December 31, 2016 in comparison with same period in 2015.
The increase in Adjusted EBITDA was primarily driven by productivity improvement initiatives including the impact of the Edge Moor
plant shut-down and global headcount reductions, which increased Adjusted EBITDA by approximately 69%. The productivity
improvement initiatives resulted in lower raw materials and lower plant operating costs. The increase was partially offset by lower
average selling price year-over-year, which decreased adjusted EBITDA by approximately 30%, and higher performance related
compensation accruals.
2015 versus 2014: Net sales decreased by $545 million or 19% for the year ended December 31, 2015 compared with the same
period in 2014, due primarily to lower selling prices and the continued unfavorable effect of foreign currency primarily against the Euro.
Oversupply in the global titanium dioxide industry and weak demand continue to put downward pressure on pricing in all regions.
Adjusted EBITDA decreased by 55% during the year ended December 31, 2015 in comparison with same period in 2014. Adjusted
EBITDA margin also decreased during the year ended December 31, 2015 in comparison with the same period in 2014. The decreases
were primarily driven by lower sales and margin which contributed to an approximately 39% decrease in Adjusted EBITDA due to lower
prices, and unfavorable effects of foreign currency which contributed to an approximately 19% decrease in Adjusted EBITDA. Partially
offsetting these decreases were productivity improvement initiatives, which resulted in lower raw materials, energy and plant operating
costs, as well as the impact of our cost reduction programs, which included certain Titanium Technology plant shut-downs and global
headcount reductions.
Fluoroproducts
(Dollars in millions)
Segment Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2,264
$
2,230
$
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
445
20%
300
13%
2,327
282
12%
Year Ended December 31,
2016
2015
2014
In March 2016, the FASB issued ASU No. 2016-09, “Compensation — Stock Compensation (Topic 718)”. The update sets forth areas
including the income tax
for simplification within several aspects of
consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments
in this update are effective for fiscal periods, and interim periods within those fiscal years, beginning after December 15, 2016.
Chemours adopted this guidance effective January 1, 2017 and the adoption did not have a significant impact on the Company’s
financial position, results of operations and of cash flows.
the accounting for shared-based payment
transactions,
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In April 2015, the FASB issued ASU No. 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement”, which
provides guidance about whether a cloud computing arrangement includes a software license. The customer should account for the
the cloud computing
software license element of
the arrangement consistent with the acquisition of other software licenses. If
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
arrangement does not include a software license, the customer should account for the arrangement as a service contract. This
guidance is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015, and
early adoption is permitted. Chemours adopted this guidance effective January 1, 2016 prospectively to all arrangements entered into or
materially modified after the effective date. The adoption did not have a significant impact on our financial position or results of
operations.
In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis”. The
amendments modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or
voting interest entities and eliminate the presumption that a general partner should consolidate a limited partnership. The amendment is
effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15,
2015. Chemours adopted this guidance effective January 1, 2016 and the adoption did not change our consolidated entities, and
therefore had no impact on the Company’s financial position, results of operations and cash flows.
In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements — Going Concern”. The update requires
management to evaluate whether there is substantial doubt about a company’s ability to continue as a going concern and to provide
related footnote disclosures. The update is effective for the annual period ending after December 15, 2016, and for annual periods and
interim periods thereafter. Early adoption is permitted. Chemours adopted the guidance effective December 31, 2016. No disclosure
was considered necessary as of December 31, 2016 as a result of management’s evaluation.
Note 4. Relationship with DuPont and Related Entities
Prior to the separation, Chemours sold finished goods to DuPont and its non-Chemours businesses. Related party sales to DuPont
recorded by Titanium Technologies, Fluoroproducts and Chemical Solutions for the year ended December 31, 2015 were $2, $34 and
$21, respectively, and for the year ended December 31, 2014 were $0, $45 and $65, respectively. Subsequent to the separation,
beginning on July 1, 2015, transactions with DuPont businesses were not considered related party transactions.
Also prior to the separation, DuPont incurred significant corporate costs for services provided to Chemours as well as other DuPont
businesses. These costs included expenses for information systems, accounting, other financial services such as treasury and audit,
purchasing, human resources, legal, facilities, engineering, corporate research and development, corporate stewardship, marketing and
these costs benefited multiple or all DuPont businesses, including Chemours, and were
business analysis support. A portion of
allocated to Chemours and its reportable segments using methods based on proportionate formulas involving total costs or other
various allocation methods that management considered consistent and reasonable. Other Chemours corporate costs are not allocated
to the reportable segments and are reported in Corporate and Other.
The allocated leveraged functional service expenses and general corporate expenses included in the Consolidated Statements of
Operations were $238 and $492 for the years December 31, 2015 and 2014, respectively, and were recorded within cost of goods sold,
selling, general and administrative expense and research and development expense for $23, $205 and $10, respectively, for the year
ended December 31, 2015, and $32, $411 and $49, respectively, for the year ended December 31, 2014. Subsequent to the separation
on July 1, 2015, transactions with DuPont businesses were not considered related party transactions. Accordingly, no costs from DuPont
were allocated to Chemours after July 1, 2015.
Cash Management and Financing
The separation agreement sets forth a process to true-up cash and working capital transferred to us from DuPont at separation. In
January 2016, Chemours and DuPont entered into an agreement, contingent upon the credit agreement amendment (described in Note
19), which provided for the extinguishment of payment obligations of cash and working capital true-ups previously contemplated in the
separation agreement. As a result, Chemours is no longer required to make any payments to DuPont, nor will DuPont make any
payments to Chemours.
the agreement set
In addition,
forth an advance payment by DuPont of approximately $190, which Chemours received in
February 2016, for certain specified goods and services that Chemours expects to provide to DuPont through mid-2017 under existing
agreements with Chemours. The advance payment was recorded as deferred liability included in other accrued liabilities of
the
Consolidated Balance Sheets and approximately $58 remains outstanding as of December 31, 2016.
The Chemours Company
For the years ended December 31, 2015 and 2014: For the year ended December 31, 2015 compared to the year ended
December 31, 2014, other income, net increased by $35 million. This change is comprised of a $42 million gain on foreign exchange
forward contracts, lower foreign currency exchange losses of approximately $23 million driven by the continued strengthening of the
U.S. dollar versus the Mexican peso, the Euro and other currencies, and additional technology and licensing income of approximately
$11 million. These increases were offset by a loss on sale of assets and businesses of $9 million in 2015 compared to the gain of $40
million recognized in 2014.
Refer to Note 8 to the Consolidated Financial Statements for details of “Other income, net”.
Provision for (benefit from) income taxes
For the years ended December 31, 2016 and 2015: For the years ended December 31, 2016 and 2015, Chemours recorded a tax
benefit of $18 million with an effective income tax rate of 164% and $98 million with an effective tax rate of approximately 52%,
respectively. The $80 million decrease in tax benefit and the corresponding change in the effective income tax rate were primarily due to
a $50 million valuation allowance recorded on U.S. foreign tax credits, the Company’s geographical mix of earnings as well as the gain
on the sale of assets and business, which resulted in tax expense and a corresponding change in the effective income tax rate for the
year ended December 31, 2016 as compared to the same period in 2015; offset by the tax benefit on the $335 million PFOA MDL
Settlement accrual (see Note 20 to the Consolidated Financial Statements for further information).
For the years ended December 31, 2015 and 2014: For the year ended December 31, 2015, Chemours recorded a tax benefit of
$98 million with an effective income tax rate of approximately 52%. For the year ended December 31, 2014, Chemours recorded a tax
provision of $149 million with an effective tax rate of approximately 27%. The $247 million decrease in the tax provision was related to
the $738 million decrease in income before income taxes. This decrease in income before income taxes was primarily due to continued
pressure on TiO2 prices, soft demand conditions for certain fluoropolymers products, and restructuring and asset impairment charges.
Although the earnings in our foreign operations remained consistent for the years ended December 31, 2015 and 2014, the earnings in
the U.S. were impacted by the aforementioned factors. The mix of geographical earnings resulted in the effective tax rates varying
between 2015 and 2014.
Segment Reviews
(Dollars in millions)
The following table represents Chemours’ total consolidated Adjusted EBITDA by segment:
Titanium Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Fluoroproducts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chemical Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and Other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
822
$
Year Ended December 31,
2016
2015
2014
466
445
39
(128)
326
300
29
(82)
573
$
$
723
282
17
(146)
876
Corporate costs and certain legal and environmental expenses that are not allocated to the segments and foreign exchange gains and
losses are reflected in Corporate and Other.
Adjusted EBITDA represents our primary measure of segment performance and is defined as income (loss) before income taxes
excluding the following:
interest expense, depreciation and amortization,
non-operating pension and other postretirement employee benefit costs, which represent the component of net periodic
pension costs (income) excluding service component,
exchange losses (gains) included in “other income, net” of the statement of operations,
employee separation, asset-related charges and other charges, net,
asset impairments,
losses (gains) on sale of business or assets, and
other items not considered indicative of our ongoing operational performance and expected to occur infrequently.
•
•
•
•
•
•
•
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Research and development expense
The Chemours Company
For the years ended December 31, 2016 and 2015: Research and development (R&D) expense decreased by $17 million or 18% for
the year ended December 31, 2016 in comparison with the year ended December 31, 2015. Reductions in R&D spend were primarily
driven by decisions to focus on fewer higher return projects. The global workforce reduction initiative also impacted the R&D function
and contributed to the overall decrease.
For the years ended December 31, 2015 and 2014: R&D expense decreased by $46 million or 32% for the year ended
December 31, 2015 in comparison with the year ended December 31, 2014. Reductions in R&D spend were primarily driven by
decisions to either delay or terminate projects following our separation from DuPont. The global workforce reduction initiative also
impacted the R&D function and contributed to the decrease in R&D expense.
Restructuring and asset related charges, net
For the years ended December 31, 2016 and 2015: We recorded pre-tax charges of approximately $170 million in connection with
the various restructuring activities implemented since 2015. This included $45 million of decommissioning, dismantling and other
related charges, which consisted of $30 million related to the Edge Moor manufacturing plant closure in the Titanium Technology
segment, $7 million related to the production lines shutdown in the Fluoroproducts segment, and $8 million related to the reactive
metals solution (“RMS”) manufacturing facility plant closure in the Chemicals Solutions segment. Also, during 2016, we recorded $119
million of asset impairment charges, which consisted of $48 million related to the aniline facility in Pascagoula, Mississippi and $58
million asset impairment charges in connection with the sale of
the Sulfur business, both of which are in the Chemical Solutions
segment, and $13 million in connection with the sale of our corporate headquarters building in the U.S. included in Corporate and Other.
For the years ended December 31, 2015 and 2014: We recorded pre-tax charges of approximately $333 million for employee
separation and other asset related charges in connection with various restructuring activities during the year. This cost included $112
million severance charges from our global workforce reduction, $140 million related to our capacity optimization in our Titanium
Technologies segment, including the closure of our Edge Moor production facility, $21 million of Fluoroproducts restructuring activities,
$57 million of restructuring relating to our Chemical Solutions segment, and impairment charges.
Refer to Note 6 to the Consolidated Financial Statements for additional information related to “Restructuring and asset related charges,
net”.
Interest expense, net
For the years ended December 31, 2016 and 2015: We incurred interest expense of $213 million and $132 million for the years
ended December 31, 2016 and 2015, respectively. Interest expense was higher in 2016 because the long-term debt was issued in
May 2015 and was outstanding for the entirety of the 2016 fiscal year. In addition, we recorded approximately $4 million of non-cash
write off of unamortized debt
issuance costs attributable to the reduction in our revolver commitment
in connection with the
February 2016 amendment to our credit agreement. These increases were partially offset by approximately $10 million of net gain on
For the years ended December 31, 2015 and 2014: We incurred interest expense of $132 million for the year ended December 31,
2015 related to our financing transactions completed in May 2015 in connection with the separation. There was no comparable expense
Refer to Note 19 to the Consolidated Financial Statements and the Liquidity and Capital Resources section of this MD&A for additional
debt extinguishment in 2016.
in 2014.
information related to our indebtedness.
Other income, net
For the years ended December 31, 2016 and 2015: For the year ended December 31, 2016, other income, net increased by $193
million when compared to the year ended December 31, 2015. This increase includes a $254 million gain on sale primarily in connection
with the sale of our C&D business and the sale of our aniline facility in Beaumont, Texas, partially offset by foreign currency exchange
losses of approximately $57 million driven by continued strengthening of the U.S. dollar primarily against the Mexican peso compared to
a foreign currency exchange gain of $19 million in 2015, which was mainly driven by the net gain from foreign currency forward
contracts.
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Tax Matters Agreement
The tax matters agreement
that Chemours and DuPont entered into governs the parties’ respective rights, responsibilities and
obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and
other tax proceedings and other matters regarding taxes. In general, under the agreement, DuPont is responsible for any U.S. federal,
state and local taxes (and any related interest, penalties or audit adjustments) reportable on a consolidated, combined or unitary return
that includes DuPont or any of its subsidiaries and Chemours and/or any of its subsidiaries for any periods or portions thereof ending
on or prior to the date of the separation and Chemours is responsible for any U.S. federal, state, local and foreign taxes (and any
related interest, penalties or audit adjustments) that are imposed on Chemours and/or any of its subsidiaries for all tax periods, whether
before or after the date of the separation.
Note 5. Research and Development Expense
Research and development expense directly incurred by Chemours was $80, $87 and $94 for the years ended December 31, 2016,
2015 and 2014, respectively. Research and development expense for the years ended December 31, 2015 and 2014 includes $10 and
$49, respectively, which represents an assignment of costs associated primarily with DuPont’s Corporate Central Research and
Development long-term research activities. This assignment was based on the cost of research projects for which Chemours was
determined to be the sponsor or co-sponsor. All research services previously provided by DuPont’s Central Research and Development
to Chemours were specifically requested by Chemours, covered by service-level agreements and billed based on usage. DuPont
research and development services were no longer used after the separation on July 1, 2015.
Note 6. Restructuring and Asset Related Charges, Net
For the years ended December 31, 2016, 2015 and 2014, Chemours recorded charges for employee separation and asset related
charges as follows:
Restructuring Related Charges:
Employee Separation Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Decommissioning and other charges, net – Restructuring . . . . . . . . . . . . . . . . .
Asset Related Charges – Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total restructuring charges, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset Related Charges – Impairment(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total restructuring and asset related charges, net
. . . . . . . . . . . . . . . . . . . . . . .
$
4
47
—
51
119
170
$
137
$
18
133
288
45
$
333
$
18
—
3
21
—
21
Year Ended December 31,
2016
2015
2014
(1)
Impairment charges for the year ended December 31, 2016 include $48 of impairment charges related to the aniline facility in
Pascagoula, Mississippi (see Note 13 for further information), $58 of impairment charges in connection with the sale of the Sulfur
business (see Note 7 for further information), and $13 of
the Company’s
corporate headquarters building (see Note 15 for further information). Impairment charges for the year ended December 31, 2015
represent asset impairment related to the reactive metals manufacturing facility (see Note 13 for further information).
impairment charges in connection with the sale of
40
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Net sales
The Chemours Company
The charges related to the restructuring programs impacted segment earnings for the years ended December 31, 2016, 2015 and 2014
are as follows:
Plant and product line closures(1)
Titanium Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fluoroproducts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chemical Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sub-total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global restructuring(2)
Titanium Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fluoroproducts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chemical Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sub-total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Year Ended December 31,
2016
2015
2014
30
7
8
45
2
4
—
6
51
$
$
140
24
12
176
33
54
25
112
288
$
$
—
—
—
—
3
16
—
19
19
(1)
(2)
Includes charges related to employee separation, decommissioning and dismantling costs, and asset related charges in
connection with the restructuring activities.
Includes approximately $24 related to corporate overhead functions that was allocated to the segments for the year ended
December 31, 2015.
For detailed discussion of net sales, see the Segment Review section of this MD&A.
Plant and product line closures
Titanium Technologies Plant and Product Line Closures:
In August 2015, the Company announced the closure of its Edge Moor,
Delaware manufacturing site located in the U.S. The Edge Moor plant produced TiO2 product for use in the paper industry and other
applications where demand had steadily declined, resulting in underused capacity at the plant. In addition, the Company permanently
shut down one underused TiO2 production line at its New Johnsonville, Tennessee plant. The Company stopped production at Edge
Moor in September 2015 and immediately began decommissioning the plant. These actions resulted in the write-off of substantially all
of the Edge Moor plant asset carrying value in 2015.
As a result, for the year ended December 31, 2015, the Company recorded charges of approximately $140, which consisted of
employee separation costs of $11, property, plant and equipment and other asset impairment charges of $115, and decommission
costs and other charges of $14. For the year ended December 31, 2016, the Company recorded additional charges of approximately
$30, which relates to decommissioning, dismantling and removal activities. The Company substantially completed the dismantling and
removal activities in January 2017.
For the years ended December 31, 2016 and 2015: Net sales for the year ended December 31, 2016 were $5.4 billion, a decrease
of approximately 6% compared to $5.7 billion for the year ended December 31, 2015. The decrease in net sales for the year ended
December 31, 2016 was driven by: i) portfolio changes from divestitures and lower selling prices resulting from the impact of lower raw
materials costs on contractual pass-through terms in the Chemical Solutions segment and ii) lower selling prices for TiO2 year over year
in the Titanium Technologies segment. These decreases were partially offset by improvements in the Fluoroproducts segment due to
growth in Opteon™ and volume increase in Titanium Technologies due to higher demand in Europe and the United States.
For the years ended December 31, 2015 and 2014: Net sales for the year ended December 31, 2015 were of $5.7 billion, a
decrease of approximately 11% compared to $6.4 billion for the year ended December 31, 2014. The decrease in net sales was
primarily due to continued pressure on TiO2 prices and the negative impact of foreign currency, partially offset by price increases in
Fluoroproducts and volume growth in Chemical Solutions portfolio.
The table below shows the impact of price, volume, currency and portfolio changes on net sales for the years ended December 31,
2016, 2015 and 2014.
Change in net sales from prior period
Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Portfolio/Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2016
2015
(3)%
2%
(1)%
(4)%
(6)%
(5)%
(1)%
(4)%
(1)%
(11)%
Cost of goods sold
For the years ended December 31, 2016 and 2015: Cost of goods sold (COGS) decreased by 10% to $4.3 billion for the year ended
December 31, 2016 compared to $4.8 billion for the year ended December 31, 2015. The decreases were primarily driven by lower
operating costs, including lower raw materials and overhead costs, and improvement in plant utilization, which decreased COGS by
approximately 7%, and portfolio changes in our Chemical Solutions segment, which also decreased COGS by approximately 4%. These
decreases were partially offset by inventory write-downs in the Chemical Solutions segment of $10 million as a result of the reactive
metals solution plant shutdown, $5 million assets write-off related to the Mining Solutions business of our Chemical Solutions segment,
and approximately $10 million increase in performance related compensation accruals.
For the years ended December 31, 2015 and 2014: COGS decreased 6% during the year ended December 31, 2015 in comparison
with the year ended December 31, 2014. Approximately 4% of the decrease was driven by lower production costs from lower costs of
raw materials, lower employee benefits and the impact of global headcount reduction as a result of our transformation plan. The
decrease was due to lower sales volume and mix, as well slightly favorable currency impact.
Selling, general and administrative expense
For the years ended December 31, 2016 and 2015: Selling, general and administrative (SG&A) expense increased 48% to $934
million for the year ended December 31, 2016 compared to $632 million for the year ended December 31, 2015. The increase in SG&A
was primarily driven by the $335 million litigation accrual related to the PFOA MDL Settlement. In addition, the increase in SG&A
includes an increase in performance related compensation accruals of approximately $36 million, higher transaction costs incurred
primarily in connection with the sale of the C&D and Sulfur businesses of approximately $10 million and other legal settlements and
related costs of $16 million. These increases were partially offset by lower pension costs and cost reduction initiatives, including the
global workforce reduction and other initiatives in connection with the transformation plan, which contributed to an approximate 15%
reduction in SG&A.
For the years ended December 31, 2015 and 2014: SG&A expense decreased 8% to $632 million for the year ended December 31,
2015 in comparison with the year ended December 31, 2014. This decrease is primarily driven by the cost reduction initiatives
implemented during the year, such as the global workforce reduction and other initiatives in connection with the transformation plan, as
well as lower employee benefits (including pension), slightly offset by $17 million of transactions, legal and other related charges and
approximately $4 million higher stock-based compensation charges primarily related to the converted DuPont awards.
Fluoroproducts Restructuring: Also,
the Fluoroproducts segment,
management approved the shutdown of certain production lines of the segment’s manufacturing facilities in the U.S. As a result, for the
year ended December 31, 2015, the Company recorded restructuring charges of approximately $21, which consist of property, plant
and equipment accelerated depreciation of $18, employee separation costs of $2, and decommissioning and other costs of $1. For the
year ended December 31, 2016, the Company recorded additional charges of approximately $7, which relates to decommissioning,
dismantling and removal activities. The Company expects to incur additional charges of approximately $3 for decommissioning,
dismantling and removal costs in 2017, which will be expensed as incurred.
its RMS
RMS Plant Closure:
business and the decision to stop production at the Niagara Falls, New York site. The Niagara Falls plant has approximately 200
employees and contractors impacted by this action. The production stopped in September 2016 and the Company immediately began
decommissioning the plant.
In the fourth quarter of 2015, the Company announced the completion of
to improve the profitability of
the strategic review of
in August 2015,
in an effort
As a result, for the year ended December 31, 2015, the Company recorded approximately $12 of employee separation costs. For the
year ended December 31, 2016, the Company recorded approximately $8, which consist of contract termination charges of $2 and
decommissioning and other related charges of $6. Additional restructuring charges of approximately $9 for decommissioning and site
redevelopment are expected to be incurred in 2017. Impairment of RMS related assets were recorded in the third quarter of 2015 (see
Note 13 for further information).
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
2015 Global restructuring
In November 2015, Chemours announced an additional global workforce reduction of approximately 430 positions. This action is part of
ongoing efforts to streamline and simplify the structure of the organization worldwide and to reduce costs. As a result of these actions,
the Company recorded approximately $48 of employee separation costs during the fourth quarter of 2015. The associated headcount
reductions were completed as of December 31, 2016, and all related payments are expected to be completed in 2017.
In June 2015, in light of continued weakness in the global titanium dioxide market cycle and continued foreign currency impacts due to
the strengthening of the U.S. dollar, Chemours implemented a restructuring plan to reduce and simplify its cost structure. This plan
resulted in a global workforce reduction of more than 430 positions. As a result, we recorded a pre-tax charge of $64 for employee
separation costs in the year ended December 31, 2015. All actions associated with this charge were completed as of December 31,
2016.
In 2014, Chemours implemented a restructuring plan to increase productivity and recorded a pre-tax charge of $19 related to this
initiative. The charge consisted of $16 related to employee separation costs and $3 for asset shut-down costs. All actions associated
with this charge were completed as of December 31, 2015.
4
4
The following table shows the change in the employee separation related liability account associated with the restructuring programs:
Titanium
Technologies
Site Closures
Fluoroproducts
Lines
Shutdown
Chemical
Solutions
Site Closures
2015 Global
Restructuring
Total
Year ended December 31, 2014 . . . . . . . . . . . . . . . . . . $
Charges to income for the year ended December 31,
2015(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charges to liability accounts:
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net currency translation and other adjustment(2) . . . . . .
Year ended December 31, 2015 . . . . . . . . . . . . . . . . . . $
Charges (credits) to income for the year ended
December 31, 2016(1)
Charges to liability accounts:
. . . . . . . . . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net currency translation and other adjustment(2) . . . . . .
Balance as of December 31, 2016 . . . . . . . . . . . . . . . . $
— $
— $
— $
— $
—
11
—
11 $
—
(7)
—
4 $
2
—
12
—
112
137
(39)
2 $
12 $
73 $
—
(1)
—
1 $
(2)
(1)
(1)
8 $
6
(59)
1
21 $
(39)
—
98
4
(68)
—
34
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,184
1,087
(2) Amounts include net currency translation adjustment of less than $1 for the period presented and rounding differences.
(1) Due to unexpected resignations of certain employees at the Company’s Niagara site during 2016, approximately $2 of employee
separation charges, related to the RMS plant closure, were reversed to income during the year ended December 31, 2016.
There are no significant outstanding liabilities related to the decommissioning and other restructuring related charges.
Note 7. Sales of Assets and Businesses
On June 13, 2016, the Company entered into an asset purchase agreement with Veolia North America (“Veolia”), pursuant to which
Veolia agreed to acquire the Sulfur business of Chemours’ Chemical Solutions segment for a purchase price of $325 in cash, subject to
customary working capital and other adjustments, of which approximately $10 was received in May 2016. The Company completed the
sale and received the remaining proceeds of approximately $311 on July 29, 2016, net of estimated working capital adjustments. Prior
the sale, in the second quarter of 2016, the Company recorded an impairment loss of approximately $58 in
to the completion of
“Restructuring and asset related charges, net” of
the Consolidated Statement of Operations. When the sale was completed, the
Company also recorded an additional pre-tax loss on sale of approximately $4, net of a benefit from contract adjustments, in “Other
income, net” in the Consolidated Statement of Operations. The net book value of the assets and liabilities disposed were $342 and $11,
respectively.
38
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The Chemours Company
DuPont and Chemours have also agreed, subject to and following the completion of
the MDL Settlement, to a limited sharing of
potential future PFOA liabilities (i.e., “indemnifiable losses,” as defined in the separation agreement between DuPont and Chemours) for
a period of five years. During that five-year period, Chemours would annually pay future PFOA liabilities up to $25 million and, if such
amount
is exceeded, DuPont would pay any excess amount up to the next $25 million (which payment will not be subject
to
indemnification by Chemours), with Chemours annually bearing any further excess liabilities under the terms of
the separation
agreement. After the five-year period, this limited sharing agreement would expire, and Chemours’ indemnification obligations under the
separation agreement would continue unchanged. Chemours has also agreed that, upon the MDL Settlement becoming effective, it will
not contest its liability to DuPont under the separation agreement for PFOA liabilities on the basis of ostensible defenses generally
applicable to the indemnification provisions under the separation agreement, including defenses relating to punitive damages, fines or
penalties or attorneys’ fees, and waives any such defenses with respect to PFOA liabilities. Chemours has, however, retained defenses
as to whether any particular PFOA claim is within the scope of the indemnification provisions of the separation agreement.
Our Results and Business Highlights
Net sales for the year ended December 31, 2016 were $5.4 billion, a decrease of 6% from $5.7 billion for the year ended December 31,
2015. These decreases were driven primarily by the portfolio changes from divestitures in the Chemical Solutions segment and lower
average selling price for TiO2, partially offset by volume increase in in the Fluoroproducts segment due to growth in Opteon™ and
volume increase in Titanium Technologies segment.
We recognized net income of $7 million for the year ended December 31, 2016 compared with a net loss of $90 million for the year
ended December 31, 2015. Our results for the year reflect $254 million of net gain on sale of assets and business in the Chemical
Solutions segment, improvements from cost reductions initiatives and strong Fluoroproducts performance, offset by $335 million
litigation accrual related to the PFOA MDL Settlement and $119 million of asset impairment charges in the Chemicals Solutions and
Corporate and Other segments.
Our Adjusted EBITDA was $822 million for the year ended December 31, 2016 compared with $573 million for the year ended
December 31, 2015. Our 2016 results reflect margin improvements in Titanium Technologies, improved profitability in Fluoroproducts,
including growth in Opteon™ sales, and improvements from cost reductions initiatives, partially offset by the impact of divestitures
within the Chemical Solutions segment.
Results of Operations
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expense(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and asset related charges, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Loss) income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Benefit from) provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2016
2015
2014
$
5,717
4,762
5,400
4,290
1,110
934
80
170
—
29
(213)
247
(11)
(18)
7
—
7
955
632
97
333
25
(132)
22
54
(188)
(98)
(90)
—
6,432
5,072
1,360
685
143
21
—
849
20
—
19
550
149
401
1
400
Net income (loss) attributable to Chemours . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
(90) $
(1)
Includes $335 million litigation accrual related to the PFOA MDL Settlement (see Note 20 to the Consolidated Financial
Statements).
] 16 Page
149996_85669 Chemours Company Annual Report_Text Signature 4 Side B Magenta
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149996_85669 Chemours Company Annual Report_Text Signature 4 Side B RGS 2
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149996_85669 Chemours Company Annual Report_Text Signature 4 Side B RGS 6
149996_85669 Chemours Company Annual Report_Text Signature 4 Side B RGS 4
149996_85669 Chemours Company Annual Report_Text Signature 4 Side B RGS 1
149996_85669 Chemours Company Annual Report_Text Signature 4 Side B Yellow
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149996_85669 Chemours Company Annual Report_Text Signature 4 Side B Cyan
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
On April 22, 2016, the Company entered into a stock and asset purchase agreement with LANXESS Corporation, (“Lanxess”), pursuant
to which Lanxess agreed to acquire the C&D business of Chemours’ Chemical Solutions segment by acquiring certain Chemours’
subsidiaries and assets for a purchase price of $230 in cash, subject to customary working capital and other adjustments. The
Company completed the sale and received proceeds of $223 on August 31, 2016, net of working capital adjustments and approximately
$2 of cash transferred. As a result, for the year ended December 31, 2016, the Company recorded a pre-tax gain of approximately
$169 in “Other income, net” in the Consolidated Statement of Operations. The net book values of the assets and liabilities disposed
were $48 (including goodwill of $13) and $6, respectively, and the Company incurred approximately $9 of transaction and other related
charges.
In November 2015, the Company signed a definitive agreement to sell its aniline facility in Beaumont, Texas to The Dow Chemical
Company (“Dow”), and the net book value of the related asset group (including goodwill) was classified as assets held-for-sale at
December 31, 2015 included in “Prepaid expenses and other” of the Consolidated Balance Sheet. The transaction closed on March 1,
2016 and Chemours received $140 in cash from Dow. The net book value of the assets disposed was $41 (including goodwill of $4),
and the Company incurred approximately $11 of transaction and other related charges. As a result of this transaction, for the year
ended December 31, 2016, Chemours recognized a pre-tax gain in the Chemical Solutions segment of approximately $88 recorded in
“Other income, net” in the Consolidated Statement of Operations.
The aggregate amount and major components of assets and liabilities disposed during the year ended December 31, 2016 are as
follows:
December 31,
2016
Current assets:
Accounts receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Impairment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-current assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets disposed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
22
17
39
298
17
136
(58)
393
432
17
17
415
Note 8. Other Income (Expense), Net
Leasing, contract services and miscellaneous income(1)
. . . . . . . . . . . . . . . . . . . . . .
Royalty income(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain (loss) on sale of assets and businesses(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange (losses) gains, net(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
35
15
254
(57)
247
$
$
25
19
(9)
19
54
$
$
17
28
40
(66)
19
Year Ended December 31,
2015
2014
2016
(1) Miscellaneous income includes accrued interest related to unrecognized tax benefits.
(2) Royalty income is primarily for technology and trademark licensing.
(3) The twelve months ended December 31, 2016 includes a gain on sale of C&D business and aniline factory; and a loss on sale of
Sulfur business. See Note 7 for further details.
(4) Exchange losses, net includes gains and losses on foreign currency forward contracts. See Note 21 for additional information.
Recent Developments
Transformation Plan
The Chemours Company
After the separation in 2015, Chemours announced a plan to transform the company by reducing structural costs, growing market
positions, optimizing its portfolio, refocusing investments, and enhancing its organization. Chemours expects the transformation plan to
deliver $500 million of incremental Adjusted EBITDA improvement over 2015 through 2017. Based on our anticipated cost reduction and
growth initiatives, we expect that our cost savings of approximately $350 million and approximately $150 million in improvements from
growth initiatives will also improve our pre-tax earnings by similar amounts through 2017. Through year-end 2016, we achieved
approximately $200 million in cost savings, and we continue to implement additional cost reduction initiatives in order to realize our
target of reducing structural costs. These improvements will be partially offset by the impact of divestitures completed during 2016
(discussed under “Chemical Solutions Portfolio Optimization Actions” below), unfavorable price and mix of fluoropolymer products, and
may also be impacted by market factors. Results of our transformation actions are also discussed in the Results of Operations,
Segment Reviews and Outlook sections of this MD&A.
Chemical Solutions Portfolio Optimization Actions
On June 13, 2016, the Company entered into an asset purchase agreement with Veolia North America (“Veolia”), pursuant to which
Veolia agreed to acquire Chemours’ Sulfur Products business (“Sulfur business”) of its Chemical Solutions segment for a purchase
price of $325 million in cash, subject to customary working capital and other adjustments, of which approximately $10 million was
received in May 2016. The Company completed the sale on July 29, 2016 and received the remaining proceeds of approximately $311
million, net of estimated working capital adjustments.
On April 22, 2016, the Company entered into a Stock and Asset Purchase Agreement with Lanxess, pursuant to which Lanxess agreed
to acquire Chemours’ Clean & Disinfect product line (the “C&D business”) by acquiring certain Chemours’ subsidiaries and assets
comprising the C&D business for a purchase price of $230 million in cash, subject to customary working capital and other adjustments.
The Company completed the sale on August 31, 2016 and received $223 million of cash, net of working capital adjustments and
approximately $2 million of cash transferred.
On March 1, 2016, the Company completed the sale of its aniline facility in Beaumont, Texas to The Dow Chemical Company (Dow) for
a cash proceeds of approximately $140 million. As part of this transaction, Chemours also entered into a supply agreement with an
initial two-year term to supply Dow with its additional aniline requirements from Chemours’ Pascagoula, Mississippi production facility.
The Company expects to use the proceeds from the above sales to fund our future capital expenditures.
Settlement of PFOA MDL Litigation
As previously reported, approximately 3,500 lawsuits have been filed in various federal and state courts in Ohio and West Virginia
alleging personal injury from exposure to perfluorooctanoic acid and its salts, including the ammonium salt (“PFOA”), in drinking water
as a result of the historical manufacture or use of PFOA at the Washington Works plant outside Parkersburg, West Virginia. That plant
was previously owned and/or operated by the performance chemicals segment of DuPont and is now owned and/or operated by
Chemours. These personal
injury lawsuits were consolidated in multi-district litigation in the United States District Court for the
Southern District of Ohio (the “MDL”). See Item 3. Legal Proceedings and our Note 20 to the Consolidated Financial Statements
included elsewhere in this Annual Report.
On February 11, 2017, DuPont entered into an agreement in principle with plaintiffs’ counsel representing the MDL plaintiffs providing
for a global settlement of all cases and claims in the MDL, including all filed and unfiled personal injury cases and claims that are part of
the plaintiffs’ counsel’s claim inventory, as well as cases that have been tried to a jury verdict (the “MDL Settlement”). The total
settlement amount is $670.7 million dollars in cash, half of which will be paid by Chemours and half paid by DuPont. DuPont’s payment
would not be subject to indemnification or reimbursement by Chemours, and Chemours has accrued $335 million associated with this
matter at December 31, 2016. In exchange for payment of the total settlement amount, DuPont and Chemours will receive a complete
release of all claims by the settling plaintiffs. The MDL Settlement was entered into solely by way of compromise and settlement and is
not in any way an admission of liability or fault by DuPont or Chemours. The MDL Settlement is not subject to court approval; however,
the MDL Settlement may not proceed in certain conditions, including a walk-away right that enables DuPont to terminate the MDL
Settlement if more than a specified number of plaintiffs determine not to participate.
F-20
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] 16 Page
149996_85669 Chemours Company Annual Report_Text Signature 4 Side B Magenta
149996_85669 Chemours Company Annual Report_Text Signature 4 Side B RGS 1
149996_85669 Chemours Company Annual Report_Text Signature 4 Side B RGS 3
149996_85669 Chemours Company Annual Report_Text Signature 4 Side B RGS 6
149996_85669 Chemours Company Annual Report_Text Signature 4 Side B RGS 5
149996_85669 Chemours Company Annual Report_Text Signature 4 Side B RGS 4
149996_85669 Chemours Company Annual Report_Text Signature 4 Side B RGS 2
149996_85669 Chemours Company Annual Report_Text Signature 4 Side B Yellow
149996_85669 Chemours Company Annual Report_Text Signature 4 Side B Black
149996_85669 Chemours Company Annual Report_Text Signature 4 Side B Cyan
Introduction
Form 10-K.
Overview
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Chemours Company
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Management’s discussion and analysis, which we refer to as “MD&A”, of our results of operations and financial condition supplements
the consolidated financial statements and related notes included elsewhere herein to help provide an understanding of our financial
(Dollars in millions)
Year Ended December 31,
2016
2015
2014
Note 9.
Income Taxes
condition, changes in financial condition and results of our operations. The discussion and analysis presented below refer to and should
be read in conjunction with the consolidated financial statements and the related notes included elsewhere in this Annual Report on
Current tax expense:
U.S. federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $
Chemours is a leading global provider of performance chemicals that are key inputs in end-products and processes in a variety of
industries. We deliver customized solutions with a wide range of industrial and specialty chemical products for markets including plastics
and coatings, refrigeration and air conditioning, general industrial, mining and oil refining. Principal products include titanium dioxide,
refrigerants, industrial fluoropolymer resins and a portfolio of mining and industrial chemicals including sodium cyanide.
Chemours manages and reports operating results through three reportable segments: Titanium Technologies, Fluoroproducts and
U.S. state and local
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax (benefit) expense:
U.S. federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. state and local
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chemical Solutions. Our position with each of these businesses reflects the strong value proposition we provide to our customers based
Total deferred tax benefit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
93
93
(101)
(17)
7
(111)
37(1) $
1(1)
62
100
(187)
(14)
3
(198)
on our long history and reputation in the chemical industry for safety, quality and reliability.
Total (benefit from) provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . .
$
(18)
$
(98)
$
85
13
73
171
(20)
(3)
1
(22)
149
On July 1, 2015, DuPont completed the previously announced spin-off of Chemours by distributing Chemours’ common stock, on a pro
rata basis, to DuPont’s stockholders of record as of the close of business on June 23, 2015 (the Record Date). Each holder of DuPont
common stock received one share of Chemours’ common stock for every five shares of DuPont’s common stock held on the Record
Date. The Separation was completed pursuant to a separation agreement and several other agreements with DuPont, including an
employee matters agreement, a tax matters agreement, a transition services agreement and an intellectual property cross-license
agreement, each of which was filed with the SEC as an exhibit to our Current Report on Form 8-K on July 1, 2015. These agreements
(1) Recorded pursuant to the tax matters agreement.
The significant components of deferred tax assets and liabilities are as follows:
govern the relationship among Chemours and DuPont following the Separation and provide for the allocation of various assets,
(Dollars in millions)
liabilities, rights and obligations. These agreements also include arrangements for transition services provided by DuPont to Chemours,
Deferred tax assets:
December 31,
2016
December 31,
2015
allocations and estimates in the consolidated financial statements prior to July 1, 2015 are based on assumptions that management
Pension and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Environmental and other reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Litigation reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation and accrued employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets and other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
$
150
149
35
27
95
456
(50)
406
(16)
(441)
(40)
(497)
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(91) $
158
22
42
35
124
381
—
381
(7)
(530)
(31)
(568)
(187)
which was substantially completed during 2016.
Basis of Presentation
Prior to July 1, 2015, Chemours operations were included in DuPont’s financial results in different legal forms, including but not limited
to wholly-owned subsidiaries for which Chemours was the sole business, components of legal entities in which Chemours operated in
conjunction with other DuPont businesses and a majority owned joint venture. For periods prior to July 1, 2015, the consolidated
financial statements, included elsewhere in this Annual Report on Form 10-K, have been prepared from DuPont’s historical accounting
records and are presented on a stand-alone basis as if the business operations had been conducted independently from DuPont. The
consolidated financial statements include the historical operations, assets and liabilities of
the legal entities that are considered to
comprise the Chemours business, including certain environmental remediation and litigation obligations of DuPont and its subsidiaries
that Chemours may be required to indemnify pursuant to the separation-related agreements executed prior to the Separation. All of the
believes are reasonable.
36
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] 16 Page
149996_85669 Chemours Company Annual Report_Text Signature 4 Side A Magenta
149996_85669 Chemours Company Annual Report_Text Signature 4 Side A RGS 6
149996_85669 Chemours Company Annual Report_Text Signature 4 Side A RGS 5
149996_85669 Chemours Company Annual Report_Text Signature 4 Side A RGS 4
149996_85669 Chemours Company Annual Report_Text Signature 4 Side A RGS 3
149996_85669 Chemours Company Annual Report_Text Signature 4 Side A RGS 2
149996_85669 Chemours Company Annual Report_Text Signature 4 Side A RGS 1
149996_85669 Chemours Company Annual Report_Text Signature 4 Side A Yellow
149996_85669 Chemours Company Annual Report_Text Signature 4 Side A Black
149996_85669 Chemours Company Annual Report_Text Signature 4 Side A Cyan
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Item 6.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The Chemours Company
An analysis of the Company’s effective tax rate is as follows:
Year Ended December 31,
2015
2016
2014
(Dollars in millions)
Statutory U.S. federal income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
State income taxes, net of federal benefit
Lower effective tax rate on international
operations – net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Exchange losses (gains)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision to return and other adjustments . . . . . . . . . . . . . . . . . . . . . . . . .
Permanent items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 199 domestic manufacturing deduction . . . . . . . . . . . . . . . . . . . . . .
Other, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
(4)
(16)
(61)
(6)
5
4
6
3
50
—
1
$ (18)
$
%
35.0 % $ (66)
(10)
150.4 %
%
$
%
35.0 % $ 192
6
5.1 %
35.0 %
1.0 %
552.5 %
51.2 %
(47.9)%
(39.1)%
(57.9)%
(27.3)%
(451.6)%
(—)%
(1.7)%
(53)
12.0 %
(23)
(8)
3.4 %
(6)
—
(3.2)%
6
15
0.5 %
(1)
—
— %
—
(5)
1
(0.5)%
—(1) — %
11
(4)
— %
—
(0.2)%
(5)
1
52.1 % $ 149
163.6 % $ (98)
(9.6)%
(1.5)%
— %
2.7 %
— %
(0.9)%
2.0 %
(0.7)%
(0.9)%
27.1 %
(1) Release of
the valuation allowance during 2015 was related to tax loss carryforward incurred prior to July 1, 2015 that is
attributable to DuPont’s tax periods pursuant to the tax matters agreement and did not impact the effective tax rate as the
adjustment was recorded in the “DuPont Company Net Investment” of the Consolidated Statements of Stockholders’ Equity for the
year ended December 31, 2015.
(Loss) income before income taxes for U.S. and international operations was:
(Dollars in millions)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. (including exports)
International
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total (loss) income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Year Ended December 31,
2015
2014
2016
(481)
470
(11)
$
$
(492)
304
(188)
$
$
244
306
550
Chemours recorded a tax benefit of $18 for the year ended December 31, 2016, a tax benefit of $98 for the year ended December 31,
2015 and a tax provision of $149 for the year ended December 31, 2014. The $80 decrease in tax benefits and the corresponding
change in the effective income tax rates were primarily due to a $50 valuation allowance recorded on U.S. foreign tax credits, the
Company’s geographical mix of earnings as well as the gain on the sale of assets and business, which resulted in a tax expense and a
corresponding change in the effective income tax rate for the year ended December 31, 2016 as compared to the same period in 2015;
offset by the tax benefit on the $335 PFOA MDL Settlement accrual (see Note 20).
The decrease in state income tax provision and the corresponding decrease in the state effective tax rate, net of federal tax benefit, for
the year ended December 31, 2016 when compared to 2015 and 2014 is due to the tax benefit recognized as a result of changes in
state tax law which decreased apportionment in states where the Company has significant operations as well as the state benefit of the
litigation accruals discussed above. The tax benefit from international operations is primarily driven by Chemours’ overall geographic
mix of earnings as well as gains on foreign divestitures that were not subject to tax. In comparing the impact of foreign operations on
our overall effective tax rate from 2015 to 2016, the significant driver of the change in the benefit is a reduction in the pre-tax loss within
the US while income from foreign operations has increased over the prior period.
The Company recorded a valuation allowance of $50 as of December 31, 2016 on its U.S. foreign tax credits based on available
positive and negative evidence. For the three years ended December 31, 2016, the Company has incurred pre-tax losses in the U.S.,
which limit the ability to consider other subjective evidence such as the Company’s projections for future growth. The amount of the
future taxable income during the
foreign tax credits that are considered realizable, however, could be adjusted if estimates of
carryforward period increase or if objective negative evidence in the form of cumulative losses is no longer present. Exchange gains
(losses) principally reflect the impact of non-taxable gains and losses resulting from remeasurement of foreign currency-denominated
monetary assets and liabilities. Depletion represents the tax benefit from the percentage depletion deductions taken pursuant to
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The following table presents Chemours’ selected historical consolidated financial data. The selected historical consolidated financial
data as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014 are derived from audited
information contained in Chemours’ consolidated financial statements included elsewhere in this Annual Report. The selected historical
consolidated financial data as of and for the years ended December 31, 2013 and 2012 are derived from Chemours’ audited
consolidated financial statements not included in this Annual Report.
The selected historical consolidated financial data for the periods ended December 31, 2012 through 2014 and for the first six months of
the year ended December 31, 2015 include certain expenses of DuPont that were allocated to Chemours for certain corporate functions
including information technology, research and development, finance, legal, insurance, compliance and human resources activities.
These costs may not be representative of the future costs Chemours will incur as an independent, publicly traded company. In addition,
Chemours’ historical financial information does not reflect changes that Chemours expects to experience in the future as a result of
Chemours’ separation from DuPont, including changes in Chemours’ cost structure, personnel needs, tax structure, capital structure,
financing and business operations. Consequently, the financial information included here may not necessarily reflect what Chemours’
financial position, results of operations and cash flows would have been had it been an independent, publicly traded company during
the periods presented. Accordingly, these historical results should not be relied upon as an indicator of Chemours’ future performance.
For a better understanding, this section should be read in conjunction with “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and the consolidated financial statements and accompanying notes included elsewhere in this
Annual Report on Form 10-K.
(Dollars in millions, except per share data)
Summary of operations:
Year Ended December 31,
2016
2015
2014
2013
2012
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,400
$ 5,717
$ 6,432
$ 6,859
$
7,365
Restructuring and asset related charges, net . . . . . . . . . . . . . . . . . . . . . .
(Loss) income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Benefit from) provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Chemours . . . . . . . . . . . . . . . . . . . . . . .
Basic earnings (loss) per share of common stock(1)
. . . . . . . . . . . . . . . . .
Diluted earnings (loss) per share of common stock(1)
. . . . . . . . . . . . . . . .
Financial position at year end:
Working capital(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings and capital lease obligations, net(3)
. . . . . . . . . . . . . . . . . . . .
General:
Purchases of property, plant and equipment
. . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends per common share(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
170
(11)
(18)
7
0.04
0.04
782
6,060
3,544
338
284
0.12
333
(188)
(98)
(90)
(0.50)
(0.50)
835
6,298
3,954
519
267
0.58
21
550
149
400
2.21
2.21
543
5,959
1
604
257
—
2
576
152
423
2.34
2.34
474
5,580
1
438
261
—
36
1,485
427
1,057
5.84
5.84
601
5,309
1
432
266
—
(1) For 2012-2014, pro forma earnings per share was calculated based on 180,996,833 shares of Chemours common stock that were
distributed to DuPont shareholders on July 1, 2015. The same number of shares was used to calculate basic and diluted earnings
per share since no Chemours equity awards were outstanding prior to the separation.
(2) Current assets minus current liabilities. Current assets include cash and cash equivalents of $902 million and $366 million at
December 31, 2016 and 2015, respectively. Years prior to 2015 do not include any cash, as Chemours’ needs were provided by its
former parent, DuPont.
respectively.
(3) Amounts as of December 31, 2016 and 2015 include unamortized debt issuance costs and discount of $47 million and $60 million,
(4) Dividends per common share for the year ended December 31, 2015 includes the following:
•
•
dividend of an aggregate amount of $100 million declared prior to separation by our then-board of directors (consisting of
DuPont employees), which was paid on September 11, 2015 to our stockholders of record as of August 3, 2015, and
dividend of $0.03 per share declared after separation by our independent board of directors which was paid on December 14,
2015 to our stockholders of record as of November 13, 2015.
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180
160
140
120
100
80
60
40
20
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Stock Performance Graph
2015.
The following graph presents the cumulative total shareholder return for the Company’s common stock compared with the Standard &
Poor’s (S&P) MidCap 400, S&P MidCap 400 Chemical and S&P SmallCap 600 indices since our separation from DuPont on July 1,
The Chemours Company
Total Stockholder Returns
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Section 613 of the Code. Goodwill represents the tax effect of the non-deductible goodwill associated with asset sales that took place in
2016. In 2015, the goodwill adjustment was the tax impact of reallocations based on Chemours’ new business reporting units and
impairment charges, as described in Note 14. In addition, Chemours is entitled to a domestic manufacturing deduction relating to
income from certain qualifying domestic production activities pursuant to Section 199 of the Code in tax years 2014, as well as a
one-time tax benefit recognized in 2014 relating to a tax accounting method change. Due to net operating losses in 2015 and 2016, the
Company is not computing a benefit related to Section 199 in those years. Consistent with the discussion in Note 2, the pre-spin
effective tax rate stated herein may not be indicative of the future effective tax rate of Chemours as a result of the separation from
DuPont.
Under the tax laws of various jurisdictions in which the Company operates, deductions or credits that cannot be fully utilized for tax
purposes during the current year may be carried forward or back, subject to statutory limitations, to reduce taxable income or taxes
payable in the future or prior years. At December 31, 2016, the U.S federal and state tax losses are $42, which substantially expire in
2035. The Company also has U.S. foreign tax credit carryforwards of $50, of which $27 expire in 2025 and $23 expire in 2026, which
are fully offset by a valuation allowance. Lastly, the Company has foreign net operating losses of $3, which substantially expire between
2025 and 2026.
At December 31, 2016, the Company deemed approximately $2,100 of unremitted earnings of subsidiaries outside the U.S. as
indefinitely reinvested. No deferred tax liability has been recognized with regard to the remittance of such earnings. It is not practical to
estimate the income tax liability that might be incurred if such earnings were remitted to the U.S.
Each year, Chemours and/or its subsidiaries, files income tax returns in the U.S. federal jurisdiction and various states and non-U.S.
jurisdictions. The following significant jurisdictions’ tax returns are subject to examination by their respective taxing authorities in the
open years listed:
Jurisdiction
Open Years
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 through 2016
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 through 2016
Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 through 2016
Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 through 2016
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 through 2016
Positions challenged by the taxing authorities may be settled or appealed by Chemours and/or DuPont in accordance with the tax
matters agreement. As a result, income tax uncertainties are recognized in the Company’s consolidated financial statements in
accordance with accounting for income taxes, when applicable. Although it
the timing, we estimate that
approximately $6 of unrecognized income tax benefits, excluding the impact relating to accrued interest and penalties, could be
resolved within the next twelve months as a result of an accounting method change request filed with the Internal Revenue Service in
the fourth quarter of 2016. We are not aware of any other matters that would result in significant changes to the amount of
unrecognized income tax benefits reflected in the Consolidated Balance Sheet as of December 31, 2016.
is difficult
to predict
6/30/2015
9/30/2015
12/30/2015
3/30/2016
6/30/2016
9/30/2016
12/30/2016
The Chemours Company
S&P MidCap 400
S&P MidCap 400 Chemical
S&P SmallCap 600
The graph assumes that the values of Chemours’ common stock, the S&P MidCap 400 index, the S&P MidCap 400 Chemical index
and the S&P SmallCap 600 index were each $100 on July 1, 2015, the date that Chemours’ common stock began “regular-way” trading
on the New York Stock Exchange, and that all dividends were reinvested. On January 29, 2016, Chemours moved from the S&P
MidCap 400 index to the S&P SmallCap 600 index. On January 3, 2017, Chemours moved from S&P SmallCap 600 index to the S&P
MidCap 400 index.
As previously discussed in Note 3, prior to the separation, Chemours was included in DuPont’s consolidated income tax returns, and
Chemours’ income taxes for those periods are computed and reported herein under the “separate return method”. Use of the separate
return method may result in differences when the sum of
the amounts allocated to stand-alone tax provisions are compared with
amounts presented in the consolidated financial statements. In that event, the related deferred tax assets and liabilities could be
significantly different from those presented herein for these periods. Certain tax attributes, e.g. net operating loss carryforwards, which
were actually reflected in DuPont’s consolidated financial statements may or may not exist at the stand-alone Chemours level.
Chemours’ consolidated financial statements do not reflect any amounts due to DuPont for income tax related matters prior to
separation as it is assumed that all such amounts due to DuPont were settled on December 31 of each year.
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
The Chemours Company
PART II
The following table shows the change in our unrecognized tax benefit.
(Dollars in millions)
Total unrecognized tax benefits as of January 1 . . . . . . . . . . . . . . . . . . . . . . . .
Gross amounts of decreases in unrecognized tax benefits as a result of adjustments
to tax provisions taken during the prior period . . . . . . . . . . . . . . . . . . . . . . . .
Gross amounts of increases in unrecognized tax benefits as a result of tax positions
taken during the current period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reduction to unrecognized tax benefits as a result of a lapse of the applicable
statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total unrecognized tax benefits as of December 31 . . . . . . . . . . . . . . . . . . . . . .
Total unrecognized tax benefits, if recognized, that would impact the effective tax
rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total amount of interest and penalties recognized in the Consolidated Statements of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total amount of interest and penalties recognized in the Consolidated Balance
Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
Year Ended December 31,
2016
2015
2014
7
$
39
$
(1)
—
—
6
$
—
—
(32)(1)
7
$
— $
— $
—
—
1(1)
—
26
(1)
15
(1)
39
39
2
8
(1) Reduction to the unrecognized tax benefits represents DuPont’s responsibilities for uncertain income tax positions recorded prior to
July 1, 2015 pursuant to the tax matters agreement. The reduction was recorded in “DuPont Company Net Investment” of the
Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2015.
The following is a rollforward of the deferred tax asset valuation allowance for the years ended December 31, 2016, 2015 and 2014.
(Dollars in millions)
Year Ended December 31,
2016
2015
2014
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net charges to income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Release of valuation allowance(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
— $
50
—
50
$
$
36
—
(36)
— $
26
10
—
36
(1) Release of
the valuation allowance during 2015 was related to tax loss carryforward incurred prior to July 1, 2015 that is
attributable to DuPont’s tax periods pursuant to the tax matters agreement. The adjustment was recorded in the “DuPont Company
Net Investment” of the Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2015.
Note 10. Earnings Per Share of Common Stock
The table below shows a reconciliation of the numerator and denominator for basic and diluted earnings per share calculations for the
periods indicated.
Numerator:
Net income (loss) attributable to Chemours . . . . . . . . . . . . . . . . . . . . . . .
$
7
$
(90)
$
400
Denominator:
Weighted average number of common shares outstanding – Basic . . . . . . .
Dilutive effect of the Company’s employee compensation plans(2)
. . . . . . . .
Weighted average number of common shares outstanding – Diluted(2)
. . . . . .
181,621,422
1,795,078
183,416,500
180,993,623
—
180,993,623
180,966,833(1)
—
180,966,833
Year Ended December 31,
2016
2015
2014
(1) For 2014, pro forma earnings per share was calculated based on 180,966,833 shares of Chemours common stock that were
distributed to DuPont shareholders on July 1, 2015.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES
Market for Registrant’s Common Equity and Related Stockholder Matters
The Company’s common stock is listed on the New York Stock Exchange, Inc. (symbol CC). The number of record holders of common
stock was 54,322 at February 14, 2017.
Holders of the Company’s common stock are entitled to receive dividends when they are declared by the board of directors. Dividends
on common stock are generally declared and paid on a quarterly basis. The Stock Transfer Agent and Registrar is Computershare Trust
Company, N.A.
for 2016 and 2015 are shown below:
The Company’s stock began trading on July 1, 2015. The quarterly high and low trading stock prices and dividends per common share
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
14.41
$
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market Prices
High
Low
Per Share
Dividend
Declared
27.29
16.08
10.83
7.84
5.82
6.99
3.06
0.03
0.03
0.03
0.03
2016
2015
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
8.80
$
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.68
$
4.58
5.94
0.03
0.55(1)
(1) Dividend was declared prior to our separation from DuPont and paid on September 11, 2015 to our stockholders of record as of
August 3, 2015.
Unregistered Sales of Equity Securities
Not Applicable.
Not Applicable.
Issuer Purchases of Equity Securities
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The Chemours Company
Erich Parker, age 65, serves as our Vice President of Corporate Communications and Chief Brand Officer. Mr. Parker was appointed
Creative Director and Global Director of Corporate Communications of DuPont in 2010. He led the initiative to develop corporate
positioning and its creative expression through branded content and program sponsorship with large international media outlets. In
2008, Mr. Parker was appointed Communications Leader for DuPont’s Safety and Protection Platform. Prior to joining DuPont,
Mr. Parker was principal of his own public relations and marketing communications firm based in Washington, D.C., and New York.
Mr. Parker has also served as Executive Vice President of Association & Issues Management; Director of Communications for the
American Academy of Actuaries; founding publisher and Executive Editor of the magazine Contingencies; and Public Affairs Aide for
Renewable Energy to the Secretary of Energy, U.S. Department of Energy.
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
(2) Diluted earnings (loss) per share is calculated using net income (loss) available to common shareholders divided by diluted
weighted average shares of common shares outstanding during each period, which includes unvested restricted shares. Diluted
earnings per share considers the impact of potentially dilutive securities except in periods in which there is a loss because the
inclusion of the potential common shares would have an antidilutive effect. Chemours had no equity awards outstanding prior to
the spin-off.
The following average number of stock options were antidilutive and, therefore, were not included in the diluted earnings per share
calculation:
Average number of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,820,499
8,358,894
—
Year Ended December 31,
2016
2015
2014
Note 11. Accounts and Notes Receivable — Trade, Net
Accounts receivable – trade, net(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VAT, GST and other taxes(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leases receivable – current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other receivables(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2016
2015
$
742
$
46
—
19
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
807
$
757
68
13
21
859
(1) Accounts receivable — trade is net of allowances of $5 and $4 as of December 31, 2016 and 2015, respectively. Allowances are
equal to the estimated uncollectible amounts.
(2) Value Added Tax (VAT) and Goods and Services Tax (GST).
(3) Other receivables consist of notes receivable, advances and other deposits.
Accounts and notes receivable are carried at amounts that approximate fair value. Bad debt expense was $7, $1 and $1 for the years
ended December 31, 2016, 2015 and 2014, respectively.
Note 12.
Inventories
December 31,
2016
2015
Finished products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Semi-finished products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Raw materials, stores and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment of inventories to LIFO basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
532
150
285
967
(200)
767
$
613
172
433
1,218
(246)
972
Inventory values, before LIFO adjustment, are generally determined by the average cost method, which approximates current cost.
Inventories are valued using the LIFO method at substantially all of the U.S. locations, which comprised $465 and $657 or 48% and
54% of
inventories before the LIFO adjustments at December 31, 2016 and December 31, 2015, respectively. The remainder of
inventory held in international locations and certain U.S. locations is valued using the average cost method.
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Note 13. Property, Plant and Equipment
Chemours’ property, plant and equipment consisted of:
December 31,
2016
2015
Equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
6,748
$
7,327
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mineral rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
814
293
106
36
7,997
(5,213)
Net property, plant and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2,784
$
737
804
111
36
9,015
(5,838)
3,177
Depreciation expense amounted to $281, $264 and $254 for the years ended December 31, 2016, 2015 and 2014, respectively.
Property, plant and equipment includes gross assets under capital leases of $5 and $7 at December 31, 2016 and 2015, respectively.
Interest expense capitalized as part of property, plant and equipment was $18 and $21 for the years ended December 31, 2016 and
2015. Chemours did not incur interest in the year ended December 31, 2014.
During the third quarter of 2016, the Company evaluated the carrying value of
its aniline manufacturing facility in Pascagoula,
Mississippi for recoverability given current business plans. The evaluation performed indicated that the carrying amount of this asset
group was not recoverable when compared to the expected undiscounted cash flows. Based on management’s assessment of the fair
value of the asset group, the Company determined that the carrying value of the Pascagoula aniline asset group exceeded its fair value
and as a result, a $48 pre-tax impairment charge was recorded in the Chemical Solutions segment, which represents an impairment of
substantially all of the remaining net book value of the Pascagoula aniline asset group.
During the third quarter of 2015, in connection with the strategic evaluation of the Chemical Solutions portfolio, excluding cyanides, the
Company determined that the carrying value of
the Chemical Solutions segment may not be
recoverable given the strategic decision to discontinue investment in the business. An impairment evaluation was performed which
indicated that the carrying amount of this asset group in the U.S. was not recoverable when compared to the expected undiscounted
cash flows. Based on management’s assessment of the fair value of the asset group, the Company determined that the carrying value
of that asset group exceeded the fair value and as a result, a $45 pre-tax impairment charge was recorded in the Chemical Solutions
segment, which represents an impairment of substantially all of the remaining net book value of the RMS asset group.
the RMS manufacturing facility of
The fair value of the asset groups were determined using an income approach based on the present value of the estimated future cash
flows. The key assumptions used included growth rates and cash flow projections, discount rate, tax rate and an estimated terminal
value. The amount was recorded in “restructuring and asset related charges, net” in the Consolidated Statements of Operations. Refer
to Note 6 for additional information.
The Chemours Company
February 2003, he was named Vice President and General Manager — Nonwovens. Prior to that, he had several assignments in
manufacturing, technology, marketing, sales and business strategy. Mr. Vergnano joined DuPont in 1980 as a process engineer. Mr.
Vergnano has served on the board of directors of the National Safety Council since 2007, the American Chemistry Council since 2015,
and Johnson Controls International plc since 2016. He previously served on the board of directors of Johnson Controls, Inc. from 2011
to 2016.
Mark E. Newman, age 53, serves as our Senior Vice President and Chief Financial Officer. Mr. Newman joined Chemours in
November 2014 from SunCoke Energy where he was SunCoke Energy’s Senior Vice President and Chief Financial Officer and led its
financial, strategy, business development and information technology functions. Mr. Newman joined SunCoke’s leadership team in
March 2011 to help drive SunCoke’s separation from its parent company, Sunoco, Inc. He led SunCoke through an initial public offering
and championed a major restructuring of SunCoke, which resulted in the initial public offering of SunCoke Energy Partners in
January 2013, creating the first coke-manufacturing master limited partnership. Prior to joining SunCoke, Mr. Newman served as Vice
President Remarketing & Managing Director of SmartAuction, Ally Financial Inc. (previously General Motors Acceptance Corporation).
Mr. Newman began his career at General Motors in 1986 as an Industrial Engineer and progressed through several financial and
operational leadership roles within the global automaker, including Vice President and Chief Financial Officer of Shanghai General
Motors Limited; Assistant Treasurer of General Motors Corporation; and North America Vice President and CFO.
E. Bryan Snell, age 60, serves as our President — Titanium Technologies. Mr. Snell was appointed President — Titanium Technologies
in May 2015. Previously, he served as Planning Director — DuPont Performance Chemicals (2014-2015). Prior to that, he held
leadership positions in DuPont Titanium Technologies,
including Planning Director (2011-12 in Wilmington, DE and 2012-13 in
Singapore) and Global Sales and Marketing Director (2008-2010). Mr. Snell served as Regional Operations Director — DuPont
Coatings and Color Technologies Platform in 2007 and 2008. He was posted in Taiwan from 2002 to 2006, in the roles of Plant
Manager — Kuan Yin Plant and Asia/Pacific Regional Director, DuPont Titanium Technologies. Mr. Snell joined DuPont in 1978 as a
process engineer and has experience in nuclear and petrochemical operations, as well as sales, business strategy and M&A.
Paul Kirsch, age 53, serves as our President — Fluoroproducts. Mr. Kirsch joined Chemours in June 2016 from Henkel AG & Company,
where he served as Senior Vice President of supply chain and operations for three years. Prior to that, he was President of
the
automotive, metals, and aerospace division of Henkel AG & Company KGaA. He also served as Co-Chairman of a Henkel-BASF joint
venture. Before joining Henkel in 2009, Mr. Kirsch spent nearly 25 years in various engineering, operations, and business development
roles of increasing responsibility within the automotive and telematics industries. He was Vice President of Hughes Telematics, where
his responsibilities included business development, quality, and strategic planning. He also served as Vice President of XM Satellite
Radio, where he was responsible for growing and running the automotive business of
the Washington, DC-based firm. Mr. Kirsch
started his career at Delphi in 1985, where he worked for nearly 19 years, in both regional and global roles ranging from product
engineer to director of engineering for Asia Pacific to director of mergers and acquisitions, as well as general director of sales,
marketing, and strategic planning.
Christian W. Siemer, age 58, serves as our President — Chemical Solutions. He moved to this role in July 2014. Mr. Siemer joined
DuPont in 2010 as the Managing Director of Clean Technologies, a business unit of DuPont Sustainable Solutions focused on process
technology development and licensing. He led the successful acquisition of MECS Inc., the global
leader in technology for the
production of sulfuric acid. Mr. Siemer began his career in 1980 with Stauffer Chemicals as a process engineer. Following Stauffer’s
acquisition by ICI plc, Mr. Siemer moved through a range of commercial roles and overseas assignments managing portfolios of
international industrial and specialty chemical businesses.
David C. Shelton, age 53, serves as our Senior Vice President, General Counsel and Corporate Secretary. In 2011, Mr. Shelton was
appointed Associate General Counsel, DuPont, and was responsible for the US Commercial team — the business lawyers and
paralegals counseling all the DuPont business units with the exception of Agriculture. Mr. Shelton was the Commercial attorney to a
variety of DuPont businesses including the Performance Materials platform, which he advised on international assignment in Geneva,
and the businesses now comprising the DuPont Chemicals and Fluoroproducts business unit. Prior to that, Mr. Shelton advised the
company on environmental and remediation matters as part of the environmental legal team. Mr. Shelton joined DuPont in 1996, after
seven years in private practice as a litigator in Pennsylvania and New Jersey.
Beth Albright, age 50, serves as our Senior Vice President Human Resources. Mrs. Albright joined DuPont in October 2014 from Day &
Zimmermann, where she held the position of Senior Vice-President Human Resources since May 2011. Prior to her experience at Day
& Zimmermann, Mrs. Albright was the Global Vice President Human Resources for Tekni-Plex, which she joined in July 2009. She
joined Rohm and Haas in 2000 and held various Human Resources supporting global businesses, technology, manufacturing and staff
functions. In 1995 she joined FMC as site Human Resources manager at a manufacturing site and progressed into the corporate office.
Mrs. Albright began her career with Fluor Daniel Construction in their Industrial Relations department in 1989.
F-26
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The Chemours Company
Chemours’ plants and equipment are maintained and in good operating condition. Chemours believes it has sufficient production
capacity for its primary products to meet demand in 2017. Properties are primarily owned by Chemours; however, certain properties are
leased, as noted in the preceding tables.
Chemours recognizes that the security and safety of
its operations are critical to its employees, community, and to the future of
Chemours. Physical security measures have been combined with process safety measures, administrative procedures and emergency
response preparedness into an integrated security plan. Prior to the separation, DuPont conducted vulnerability assessments at
operating facilities in the U.S. and high priority sites worldwide and identified and implemented appropriate measures to protect these
facilities from physical and cyber-attacks. Chemours intends to conduct similar vulnerability assessments periodically in the future.
Chemours is partnering with carriers, including railroad, shipping and trucking companies, to secure chemicals in transit.
The Company is subject to various legal proceedings, including, but not limited to, product liability, patent infringement, antitrust claims
and claims for property damage or personal injury. Information regarding certain of these matters is set forth below and in Note 20 to
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Note 14. Goodwill and Other Intangible Assets, Net
Goodwill: The following table summarizes changes in the carrying amount of goodwill by reportable segment:
Titanium
Technologies
Fluoroproducts
Chemical
Solutions
Total
Balance as of December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation and other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale of business(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Currency translation and other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
13
—
—
13
—
—
13
$
$
$
85
—
—
85
—
—
85
$
100
$
(25)
(7)
68
$
(13)
—
55
$
$
$
198
(25)
(7)
166
(13)
—
153
3
(1) Represents goodwill disposed in connection with the sale of the C&D business (See Note 7).
Accumulated impairment losses as of December 31, 2016, 2015 and 2014 included in goodwill are $25, $25 and $0, respectively.
The Company has three operating segments: Titanium Technologies, Fluoroproducts and Chemical Solutions (see Note 24). The
Company defines its reporting units as one level below the operating segments except for Titanium Technologies, which is an operating
segment and a reporting unit. The Company tested the goodwill attributable for each of reporting units within the operating segments
for impairment as of October 1, 2016 and concluded that the estimated fair value of each reporting unit, for which goodwill is recorded,
substantially exceeded the reporting unit’s carrying value, indicating that none of the Company’s goodwill was impaired.
In October 2016, the Fluoroproducts segment leader announced a new organizational structure change to better manage the business
and drive accountability. The change in the organizational structure also changed the reporting units of Fluoroproducts segment to
Fluorochemicals and Fluoropolymers effective November 1, 2016. Prior to this change, the Fluoroproducts segment’s reporting units
were Fluorochemicals, Industrial Resins and Diversified Technologies, which were tested for annual impairment as of October 1, 2016.
The reporting unit change did not result in any impairment based on a separate impairment evaluation performed at the effective date of
the change, as estimated fair value of the new reporting unit substantially exceeded its carrying value.
In 2015, in connection with the strategic evaluation of the Chemical Solutions portfolio and the resulting changes to the reporting units
in the third quarter of 2015, the Chemical Solutions segments recorded a $25 pre-tax impairment charge related to its Sulfur reporting
unit. Sulfur reporting unit was disposed through the sale of its assets and business during 2016 (see Note 7).
The Company evaluates goodwill for impairment using a two-step process. The first step is utilizing a discounted cash flow methodology
to calculate the fair value of its reporting units; and where market comparables are available, the Company considers EBITDA multiples
as part of the reporting unit valuation analysis. Key assumptions used in the discounted cash flows include projected growth rates,
discount rates, tax rates and terminal values. Factors considered in developing cash flows and EBITDA projections include: 1)
macroeconomic conditions; 2) industry and market considerations; 3) costs of raw materials and labor or other costs; 4) overall financial
performance; and 5) other relevant entity-specific events. The discount rate used represents the weighted average cost of capital for the
reporting units considering the risks and uncertainty inherent in the cash flows of the reporting units and in the internally developed
forecasts. The second step of the quantitative test is required if the first step of the quantitative test indicates a potential impairment.
The second step is performed by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of its goodwill.
If the carrying amount of goodwill is greater than its implied fair value, an impairment loss is recorded. The use of these unobservable
inputs results in the fair value estimate being classified as a Level 3 asset measured at fair value on a nonrecurring basis subsequent to
its original recognition.
The determination of whether or not goodwill is impaired involves a significant level of judgment in the assumptions underlying the
approaches’ used to determine the estimated fair value of our reporting units. Chemours believes that assumptions and rates used in
the impairment assessment are reasonable. However, these assumptions are judgmental and variations in any assumptions could result
in materially different calculations of fair value. The Company will continue to evaluate goodwill on an annual basis as of October 1,
and whenever events or changes in circumstances, such as significant adverse changes in operating results, market conditions or
changes in management’s business strategy, indicate that there may be a probable indicator of impairment. It is possible that the
30
F-27
Item 3. LEGAL PROCEEDINGS
Legal Proceedings
the Consolidated Financial Statements.
Litigation
PFOA: Environmental and Litigation Proceedings
Consolidated Financial Statements.
Environmental Proceedings
LaPorte Plant, LaPorte, Texas
For purposes of this report, the term PFOA means collectively perfluorooctanoic acid and its salts, including the ammonium salt and
does not distinguish between the two forms. Information related to this and other litigation matters is included in Note 20 to the
The U.S. Environmental Protection Agency (EPA) conducted a multimedia inspection at the DuPont LaPorte facility in January 2008.
DuPont, the EPA and the Department of Justice (DOJ) began discussions in the fall of 2011 relating to the management of certain
materials in the facility’s waste water treatment system, hazardous waste management, flare and air emissions. These negotiations
continue. Chemours operates a fluoroproducts production facility at this site.
Dordrecht, Netherlands
The Company has received requests from the Labor Inspectorate (ISZW), the local environmental agency (OZHZ) and the National
Institute for Public Health and the Environment (RIVM) in the Netherlands for information and documents regarding the Dordrecht site’s
operations. The Company has complied with the requests. We understand that some of
the requests from OZHZ are part of a
preliminary investigation initiated by a public prosecutor, although we have not received notice that it intends to pursue such action.
Information regarding mine safety and other regulatory actions at the Company’s surface mine in Starke, Florida is included in Exhibit
Item 4. MINE SAFETY DISCLOSURES
95 to this report.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list of the executive officers and a summary of their professional experience:
Mark P. Vergnano, age 59, serves as our President and Chief Executive Officer. Prior to joining Chemours, he held roles of
increasing responsibility at E. I. du Pont de Nemours and Company. In October 2009, Mr. Vergnano was appointed Executive Vice
President of DuPont and was responsible for multiple businesses and functions, including the businesses in the Chemours segment:
DuPont Chemicals & Fluoroproducts and Titanium Technologies. In June 2006, he was named Group Vice President of DuPont
Safety & Protection. In October 2005, he was named Vice President and General Manager — Surfaces and Building Innovations. In
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
assumptions used by management related to the evaluation may change or that actual results may vary significantly from
management’s estimates.
Intangible Assets, Net: The following table summarizes the gross carrying amounts and accumulated amortization of other
intangible assets by major class:
Our corporate headquarters is in Wilmington, Delaware, and we maintain a global network of production facilities and technical centers
located in cost-effective and strategic locations. We also use contract manufacturing and joint venture partners in order to provide
regional access or to lower manufacturing costs, as appropriate. The following chart lists our production facilities as of December 31,
3
Customer lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased and licensed technology . . . . . . . . . . . . . . . . . . . .
Other(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
December 31, 2016
Accumulated
Amortization
(7)
$
(18)
(2)
(2)
—
(29)
$
Cost
9
$
19
5
3
10
$ 46
Net
$
2
1
3
1
10
$ 17
Cost
$ 10
19
5
8
3
$ 45
December 31, 2015
Accumulated
Amortization
(8)
$
(17)
(2)
(6)
(2)
(35)
$
$
$
Net
2
2
3
2
1
10
(1) Represents non-cash favorable supply contracts acquired in connection with the sale of Sulfur business and recognized during the
third quarter of 2016 based on the present value of the difference between their contractual cash flows and estimated cash flows
had the contracts been executed at a determinable market price. These contract intangibles will be amortized to cost of goods sold
over the remaining life of the supply contracts through 2021.
The aggregate pre-tax amortization expense for definite-lived intangible assets was $3, $3 and $3 for the years ended December 31,
2016, 2015 and 2014, respectively. The estimated aggregate pretax amortization expense for 2017, 2018, 2019, 2020 and 2021 is $4,
$3, $3, $3 and $1, respectively. Definite-lived intangible assets are amortized over their estimated useful lives, generally for periods
ranging from 5 to 20 years. The reasonableness of the useful lives of these assets is continually evaluated. There are no indefinite-lived
intangible assets.
Note 15. Other Assets
Leases receivable – non-current(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized repair and maintenance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension assets(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances and deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miscellaneous(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
$
$
— $
145
159
—
41
29
43
417
$
125
149
138
11
47
—
38
508
December 31,
2016
December 31,
2015
(1) Relates to Sulfur business which was included in the assets disposed in 2016. See Direct Financing Leases below.
(2) Pension assets represent the funded status of certain of the Company’s long-term employee benefit plans.
(3) Miscellaneous includes deferred financing fees related to the Revolving Credit Facility of $13 and $19 as of December 31, 2016
and 2015, respectively.
Asset Held for Sale
In December 2016, the Company’s corporate headquarters building located in Wilmington, Delaware, was classified as held for sale in
connection with a sale agreement entered into in January 2017. The transaction is expected to be completed in the first quarter of
2017, and the Company expects to receive approximately $32 proceeds, subject to customary closing adjustments. As a result, the
Company recorded approximately $13 pre-tax impairment charge for the year ended December 31, 2016. The Company intends to
lease a portion of the building subject to the completion of the sale.
Direct Financing Leases
Prior to the sale of the Sulfur business, Chemours had constructed fixed assets on land that it leased from third parties at two of its
facilities in the U.S. (Borderland and Morses Mill). Management has analyzed these arrangements and determined these assets
(3) There are two facilities at this location.
F-28
29
Item 2. PROPERTIES
Chemours Production Facilities and Technical Centers
The Chemours Company
2016:
North America
Production Facilities
Titanium Technologies
Fluoroproducts
Chemical Solutions
Pascagoula, MS
Memphis, TN
Shared
Locations
Belle, WV(3)
DeLisle, MS
New Johnsonville, TN
Starke, FL (Mine)
Europe, Middle East & Africa
(EMEA)
Latin America
Asia Pacific
Altamira, Mexico
Barra Mansa, Brazil(2)
Kuan Yin, Taiwan
El Dorado, AR(1)
Elkton, MD(1)
Louisville, KY
Fayetteville, NC
Deepwater, NJ
Corpus Christi, TX
LaPorte, TX(2)
Washington, WV
Maitland, Canada
Mechelen, Belgium
Villers St. Paul, France(1)
Dordrecht, Netherlands
Changshu, China
Shanghai, China(4)
SiChuan, China(4)
Chiba, Japan(4)
Shimizu, Japan(4)
(1) Site is leased from third party.
(2) Site is leased from DuPont.
(3) Shared facility between the Chemical Solutions and Fluoroproducts segments.
(4) Sites with joint venture equity affiliates.
We have technical centers and R&D facilities located at a number of our production facilities. We also maintain standalone technical
centers to serve our customers and provide technical support. The following chart lists our standalone technical centers as of
Titanium Technologies
Fluoroproducts
Chemical Solutions Shared Locations
Technical Centers
Akron, OH(2)
Wilmington, DE (All
Segments)(2)(3)
Kallo, Belgium(1)
Mechelen, Belgium(1)
Meyrin, Switzerland(2)
Barra Mansa, Brazil(2)
Mexico City, Mexico(1)
Utsonomyia, Japan(2)
Shanghai, China(2)
(All Segments)
December 31, 2016:
Region
North America
EMEA
Latin America
Asia Pacific
(1) Leased from third party.
(2) Leased from DuPont.
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The Chemours Company
Certain provisions in our amended and restated certificate of incorporation and amended and restated by-laws, and of
Delaware law, may prevent or delay an acquisition of us, which could decrease the trading price of the common stock.
Our amended and restated certificate of
incorporation and amended and restated by-laws contain, and Delaware law contains,
provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids
unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with our board of directors rather than to
attempt a hostile takeover. These provisions include, among others:
the inability of our stockholders to act by written consent;
the limited ability of our stockholders to call a special meeting;
rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings;
the right of our board of directors to issue preferred stock without stockholder approval;
the requirement that stockholders holding at least 80 percent of our voting stock are required to amend certain provisions in
our amended and restated certificate of incorporation and our amended and restated by-laws.
In addition, we are subject to Section 203 of the Delaware General Corporations Law (the DGCL). Section 203 provides that, subject to
limited exceptions, persons that (without prior board approval) acquire, or are affiliated with a person that acquires, more than 15
percent of the outstanding voting stock of a Delaware corporation shall not engage in any business combination with that corporation,
including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or
its affiliate becomes the holder of more than 15 percent of the corporation’s outstanding voting stock.
We believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential
acquirers to negotiate with our board of directors and by providing our board of directors with more time to assess any acquisition
proposal. These provisions are not intended to make us immune from takeovers. However, these provisions will apply even if an
acquisition proposal or offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our
attempts to remove and replace incumbent directors.
Several of the agreements that we have entered into with DuPont require DuPont’s consent to any assignment by us of our rights and
obligations, or a change of control of us, under the agreements. The consent rights set forth in these agreements might discourage,
delay or prevent a change of control that a stockholder may consider favorable.
the Code resulting from an acquisition or issuance of its stock, even if it did not participate in or otherwise facilitate the acquisition, and
this indemnity obligation might discourage, delay or prevent a change of control that a stockholder may consider favorable. Please see
the risk factor “If the distribution, together with certain related transactions, were to fail to qualify for non-recognition treatment for U.S.
federal income tax purposes, then we could be subject to significant tax and indemnification liability and stockholders receiving our
common stock in the distribution could be subject to significant tax liability.” for further information.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
represent direct financing leases, whereby Chemours was the lessor of
this equipment. Lease receivables were recorded, which
represent the balance of the minimum future lease payments. The current portion of lease receivables was previously included in
accounts and notes receivable — trade, net, as shown in Note 11 and the long-term portion was previously included in other assets, as
shown above. These lease receivables were included in the sale of the Sulfur business that was completed in August 2016 (see Note
7).
Note 16. Accounts Payable
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December 31,
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December 31,
2015
the ability of our directors, and not stockholders, to fill vacancies (including those resulting from an enlargement of the board
of directors) on our board of directors; and
Note 17. Other Accrued Liabilities
Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VAT and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
$
$
858
26
884
December 31,
2016
Compensation and other employee-related costs . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee separation costs(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued litigation(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Environmental remediation(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer rebates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest
Miscellaneous(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
$
$
154
31
342
71
39
53
76
21
85
872
$
$
$
$
945
28
973
December 31,
2015
109
76
11
68
32
53
20
21
64
454
board of directors determines is not in our best interests and our stockholders’. These provisions may also prevent or discourage
(1) See Note 6 for further information.
In addition, an acquisition or further issuance of our stock could trigger the application of Section 355(e) of the Code. Under the tax
(4) Miscellaneous primarily includes accrued utility expenses, property taxes, an accrued indemnification liability, asset retirement
matters agreement executed prior to the spin-off, we would be required to indemnify DuPont for the tax imposed under Section 355(e) of
obligations (see Note 20) and other miscellaneous expenses.
(2) Accrued litigation includes $335 litigation accrual related to the PFOA MDL Settlement. See Note 20 for further discussion of
accrued litigation and environmental remediation.
(3) Deferred revenue includes $58 prepayment by DuPont for specified goods and services, which Chemours expects to provide
through mid-2017.
Note 18. Other Liabilities
Environmental remediation(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee-related costs(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee separation costs(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued litigation(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset retirement obligations(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miscellaneous(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
$
$
208
113
3
53
41
5
101
524
$
$
223
108
23
58
41
11
89
553
December 31,
2016
December 31,
2015
(1) See Note 20 for further details on environmental remediation, asset retirement obligations and accrued litigation.
(2) See Note 22 for further details on long-term employee benefits.
(3) See Note 6 for further information.
(4) Miscellaneous primarily includes an accrued indemnification liability.
28
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Note 19. Debt
Long-term debt was comprised of the following at December 31, 2016 and 2015:
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Senior secured term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,372
$
1,493
Long-term debt:
December 31,
2016
December 31,
2015
Senior unsecured notes:
6.625%, due May 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.00%, due May 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.125%, due May 2023 (€295 at December 31, 2016; €360 at December 31, 2015)
Other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Unamortized issue discount on senior secured term loan . . . . . . . . . . . . . . .
Less: Unamortized debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Short-term borrowings and current maturities . . . . . . . . . . . . . . . . . . . . . . .
1,158
750
308
3
3,591
5
42
15
1,350
750
395
26
4,014
7
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The Chemours Company
merging, consolidating or liquidating;
issuing equity securities beyond certain thresholds;
repurchasing our capital stock; or
ceasing to actively conduct our business.
These restrictions may limit our ability to pursue certain strategic transactions or other transactions, including our transformation plans
that we may believe to otherwise be in our best interests or that might increase the value of our business. In addition, under the tax
matters agreement, we are required to indemnify DuPont against any such tax liabilities as a result of the acquisition of our stock or
assets, even if we do not participate in or otherwise facilitate the acquisition.
Risks Related to Our Common Stock
Our stock price could become more volatile and investments could lose value.
The market price of our common stock and the number of shares traded each day has experienced significant fluctuations since our
separation from DuPont and may continue to fluctuate significantly. The market price for our common stock may be affected by a
number of factors, including, but not limited to:
Long-term debt, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
3,529
$
3,915
changes in earnings estimates by securities analysts or our ability to meet those estimates or our earnings guidance;
Senior Secured Credit Facilities
On May 12, 2015, Chemours entered into a credit agreement that provides for a seven-year senior secured term loan (the Term Loan
Facility) in a principal amount of $1,500 repayable in equal quarterly installments at a rate of one percent of the original principal
amount per year, with the balance payable on the final maturity date. The Term Loan Facility was issued with a $7 original
issue
discount and bears interest at a rate of LIBOR plus 3.00%, with a 0.75% LIBOR floor. The proceeds from the Term Loan Facility were
used to fund a portion of the distribution to DuPont, along with related fees and expenses.
The credit agreement also provided for a five-year senior secured revolving credit facility (the Revolving Credit Facility), which has been
reduced to $750 as part of the amendment completed on February 19, 2016 (discussed below). The proceeds of any loans made
under the Revolving Credit Facility can be used for capital expenditures, acquisitions, working capital needs and other general corporate
purposes. No borrowings were outstanding under our Revolving Credit Facility but had $132 and $129 in letters of credit issued and
outstanding under this facility at December 31, 2016 and 2015, respectively. The Revolving Credit Facility bears variable interest of a
range based on our total net leverage ratio between (a) 0.50% and 1.25% for base rate loans and (b) 1.50% and 2.25% for LIBOR
loans. The applicable margins were 1.00% for base rate loans and 2.00% for LIBOR loans as of December 31, 2016 and 1.25% for
base rate loans and 2.25% for LIBOR loans as of December 31, 2015. In addition, we are required to pay a commitment fee on the
average daily unused amount of the Revolving Credit Facility at a rate based on our total net leverage ratio, between 0.20% and 0.35%.
As of December 31, 2016 and 2015, commitment fees were assessed at a rate of 0.30% and 0.35%, respectively.
In September 2015, in connection with the Company’s transformation plan announced in August 2015, Chemours and its Revolving
Credit Facility lenders entered into an amendment to the Revolving Credit Facility that modified the consolidated EBITDA definition in
the covenant calculation to include pro forma benefits from future cost savings initiatives in the calculation of financial covenants that
rely on consolidated EBITDA beginning from the quarter ended September 30, 2015. Since the revolver availability in any quarter is
determined by the cushion remaining in the financial maintenance covenants at the end of
the previous quarter, this amendment
increased the Company’s access to the revolving credit facility.
In February 2016, Chemours and its Revolving Credit Facility lenders entered into a second amendment to the Revolving Credit Facility
that (a) replaced the total net leverage ratio financial covenant with senior secured net leverage ratio; (b) reduced the minimum required
levels of interest expense coverage ratio covenant; (c) increased the limits and extended the time horizon for inclusion of pro forma
benefits of announced cost reduction initiatives into consolidated EBITDA definition for the purposes of calculating financial
maintenance covenants; and (d) reduced the revolver availability from $1,000 to $750. As a result of this amendment, the Company
recorded a charge of approximately $4 to write off a proportionate amount of unamortized debt issuance costs attributable to the
reduction in revolver commitment, which was included in “Interest expense, net”.
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•
•
•
•
•
•
•
•
•
•
•
our quarterly or annual earnings, or those of other companies in our industry;
actual or anticipated fluctuations in our operating results;
anticipated or actual outcomes or resolutions of legal or other contingencies;
the operating and stock price performance of other comparable companies;
credit rating agency actions;
a change in our dividend or stock repurchase activities;
changes in rules or regulations applicable to our business;
the announcement of new products by us or our competitors;
overall market fluctuations and domestic and worldwide economic conditions; and
other factors described in these “Risk Factors” and elsewhere in this Form 10-K.
A significant drop or rise in our stock price could expose us to costly and time-consuming litigation, which could result in substantial
costs and divert management’s attention and resources, resulting in an adverse effect on our business.
We cannot guarantee the timing, amount, or payment of dividends on our common stock in the future.
The declaration, payment and amount of any dividend are subject to the sole discretion of our board of directors and, in the context of
our financial policy, will depend upon many factors, including our financial condition and prospects, our capital requirements and access
to capital markets, covenants associated with certain of our debt obligations, legal requirements and other factors that our board of
directors may deem relevant, and there can be no assurances that we will continue to pay a dividend in the future.
A stockholder’s percentage of ownership in us may be diluted in the future.
A stockholder’s percentage ownership in us may be diluted because of equity issuances for acquisitions, capital market transactions or
otherwise, including, without limitation, equity awards that we may be granting to our directors, officers and employees. Such issuances
may have a dilutive effect on our earnings per share, which could adversely affect the market price of our common stock.
In addition, our amended and restated certificate of incorporation authorizes us to issue, without the approval of our stockholders, one
or more classes or series of preferred stock having such designation, powers, preferences and relative, participating, optional and other
special rights, including preferences over our common stock with respect to dividends and distributions, as our board of directors
generally may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the
value of our common stock. For example, we could grant the holders of preferred stock the right to elect some number of our directors
in all events or on the happening of specified events or to veto specified transactions. Similarly, the repurchase or redemption rights or
liquidation preferences we could assign to holders of preferred stock could affect the residual value of our common stock.
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The Chemours Company
undertakings were not correct, or that the distribution should be taxable for other reasons, including if the IRS were to disagree with the
conclusions in the tax opinion that are not covered by the IRS Ruling.
If the distribution ultimately was determined to be taxable, then a stockholder of DuPont that received shares of our common stock in
the distribution would be treated as having received a distribution of property in an amount equal to the fair market value of such shares
on the distribution date and could incur significant income tax liabilities. Such distribution would be taxable to such stockholder as a
dividend to the extent of DuPont’s current and accumulated earnings and profits. Any amount that exceeded DuPont’s earnings and
profits would be treated first as a non-taxable return of capital to the extent of such stockholder’s tax basis in its shares of DuPont stock
with any remaining amount being taxed as a capital gain. DuPont would recognize a taxable gain in an amount equal to the excess, if
any, of the fair market value of the shares of our common stock held by DuPont on the distribution date over DuPont’s tax basis in such
shares. In addition, if certain related transactions fail to qualify for tax-free treatment under U.S. federal, state and/or local tax law and/or
foreign tax law, we and DuPont could incur significant tax liabilities under U.S. federal, state, local and/or foreign tax law.
Generally, taxes resulting from the failure of the separation and distribution or certain related transactions to qualify for non-recognition
treatment under U.S. federal, state and/or local tax law and/or foreign tax law would be imposed on DuPont or DuPont’s stockholders
and, under the tax matters agreement that we entered into with DuPont prior to the spin-off, DuPont is generally obligated to indemnify
us against such taxes to the extent that we may be jointly, severally or secondarily liable for such taxes. However, under the terms of the
tax matters agreement, we are also generally responsible for any taxes imposed on DuPont that arise from the failure of the distribution
to qualify as tax-free for U.S. federal income tax purposes within the meaning of Section 355 of the Code or the failure of such related
transactions to qualify for tax-free treatment, to the extent such failure to qualify is attributable to actions, events or transactions relating
to our, or our affiliates’, stock, assets or business, or any breach of our or our affiliates’ representations, covenants or obligations under
the tax matters agreement (or any other agreement we enter into in connection with the separation and distribution), the materials
submitted to the IRS or other governmental authorities in connection with the request for the IRS Ruling or other tax rulings or the
representation letter provided to counsel in connection with the tax opinion. Events triggering an indemnification obligation under the
agreement include events occurring after the distribution that cause DuPont to recognize a gain under Section 355(e) of the Code. Such
tax amounts could be significant. To the extent we are responsible for any liability under the tax matters agreement, there could be a
material adverse impact on our business, financial condition, results of operations and cash flows in future reporting periods.
We are subject to continuing contingent tax-related liabilities of DuPont.
There are several significant areas where the liabilities of DuPont may become our obligations. For example, under the Code and the
related rules and regulations, each corporation that was a member of DuPont’s consolidated tax reporting group during any taxable
period or portion of any taxable period ending on or before the effective time of the distribution is jointly and severally liable for the U.S.
federal income tax liability of the entire consolidated tax reporting group for such taxable period. In connection with the separation and
distribution, we entered into a tax matters agreement with DuPont that allocates the responsibility for prior period taxes of DuPont’s
consolidated tax reporting group between us and DuPont. If DuPont were unable to pay any prior period taxes for which it is
responsible, however, we could be required to pay the entire amount of such taxes, and such amounts could be significant. Other
provisions of federal, state, local, or foreign law may establish similar liability for other matters, including laws governing tax-qualified
pension plans, as well as other contingent liabilities.
We agreed to numerous restrictions to preserve the tax-free treatment of the transactions in the U.S., which may reduce our
strategic and operating flexibility.
Our ability to engage in significant equity transactions could be limited or restricted in order to preserve, for U.S. federal income tax
purposes, the tax-free nature of the distribution by DuPont. Even if the distribution otherwise qualifies for tax-free treatment under
Section 355 of the Code, the distribution may result in corporate-level taxable gain to DuPont under Sections 355(e) and 368(a)(1)(D) of
the Code if 50 percent or more, by vote or value, of shares of our stock or DuPont’s stock are acquired or issued as part of a plan or
series of related transactions that includes the distribution. The process for determining whether an acquisition or issuance triggering
these provisions has occurred is complex, inherently factual and subject to interpretation of the facts and circumstances of a particular
case. Any acquisitions or issuances of our stock or DuPont’s stock within a two-year period after the distribution generally are presumed
to be part of such a plan, although we or DuPont, as applicable, may be able to rebut that presumption. Accordingly, under the tax
matters agreement entered into prior to the spin-off, for the two-year period following the distribution, we are prohibited, except in certain
circumstances, from:
•
entering into any transaction resulting in the acquisition of 40 percent or more of our stock or substantially all of our assets,
whether by merger or otherwise;
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
In December 2016, Chemours entered into a third amendment to the credit agreement to change certain covenants and allow the
Company to enter into a sale and leaseback transaction for the sale of its corporate headquarters building located in Wilmington,
Delaware. The amendment requires the Company to use the proceeds from sale to repay portion of the term loans. These transactions
are expected to be completed in the first quarter of 2017, and the Company expects to receive approximately $32 proceeds, subject to
customary closing adjustments.
Fees and expenses incurred in connection with the amendments were approximately $3 and $1 for the years ended December 31, 2016
and 2015, respectively, which were primarily capitalized in “Other assets” of the Consolidated Balance Sheets and will be amortized to
interest expense on a straight-line basis over the remaining term of the Revolving Credit Facility.
The credit agreement, as amended, contains financial covenants which, solely with respect to the Revolving Credit Facility, require
Chemours not to exceed a maximum senior secured net leverage ratio of 3.50 to 1.00 each quarter through December 31, 2016, 3.00
to 1.00 through June 30, 2017 and further decreasing by 0.25 to 1.00 every subsequent six months to 2.00 to 1.00 by January 1, 2019
and thereafter. Chemours is also required to maintain a minimum interest coverage ratio of 1.75 to 1.00 each quarter through June 30,
2017 and further increasing by 0.25 to 1.00 every subsequent six months to 3.00 to 1.00 by January 1, 2019 and thereafter. In addition,
the credit agreement contains customary affirmative and negative covenants that, among other things, limit or restrict Chemours and its
subsidiaries’ ability, subject to certain exceptions, to incur liens, merge, consolidate or sell, transfer or lease assets, make investments,
pay dividends, transact with subsidiaries and incur indebtedness. The credit agreement also contains customary representations and
warranties and events of default. Chemours was in compliance with its debt covenants as of December 31, 2016.
Chemours’ obligations under the senior secured credit facilities are guaranteed on a senior secured basis by all of its material domestic
subsidiaries, subject to certain agreed upon exceptions. The obligations under the senior secured credit facilities are also, subject to
certain agreed upon exceptions, secured by a first priority lien on substantially all of Chemours and its material wholly-owned domestic
subsidiaries’ assets, including 100% of the stock of domestic subsidiaries and 65% of the stock of certain foreign subsidiaries.
Senior Unsecured Notes
On May 12, 2015, Chemours issued senior unsecured notes (the “Notes”) with an aggregate principal of approximately $2,503 in a
private placement, which comprise of $1,350 aggregate principal amount issued at an interest rate of 6.625% per annum and will
mature on May 15, 2023 (the “2023 Notes”), $750 aggregate principal amount issued at an interest rate of 7.000% per annum and will
mature on May 15, 2025 (the “2025 Notes”) and €360 aggregate principal amount issued at an interest rate of 6.125% and will mature
on May 15, 2023 (the “Euro Notes”). The Notes require payment of principal at maturity and interest semi-annually in cash and in
arrears on May 15 and November 15 of each year.
The proceeds from the Notes were used to fund the cash and in-kind distributions to DuPont and to pay related fees and expenses. The
in-kind distribution to DuPont of $507 aggregate principal amount of Chemours 2025 Notes were exchanged by DuPont with third
parties for certain DuPont notes.
In connection with the issuance of the Notes, Chemours entered into a registration rights agreement, in which Chemours agreed to file
with the SEC, a registration statement for the exchange of the Notes for new registered notes with identical terms. On March 18, 2016,
Chemours filed a registration statement on Form S-4 with respect to the exchange offer. The registration statement was declared
effective on April 12, 2016, and the exchange offer was completed on May 19, 2016. In addition, on May 5, 2016, the Euro Notes were
listed for trading on the Global Exchange Market of the Irish Stock Exchange.
Each series of Notes is or will be fully and unconditionally guaranteed, jointly and severally, by Chemours’ existing and future
domestic subsidiaries that guarantee (the Guarantors) the Senior Secured Credit Facilities or that guarantee other indebtedness of
Chemours or any guarantor in an aggregate principal amount in excess of $75 (the Guarantees). The Notes are unsecured and
unsubordinated obligations of Chemours. The Guarantees are unsecured and unsubordinated obligations of the Guarantors. The Notes
rank equally in right of payment to all of Chemours’ existing and future unsecured unsubordinated debt and senior in right of payment
to all of Chemours’ existing and future debt that is by its terms expressly subordinated in right of payment to the Notes. The Notes are
subordinated to indebtedness under the Senior Secured Credit Facilities as well as any future secured debt to the extent of the value of
the assets securing such debt. Chemours’ is obligated to offer to purchase the Notes at a price of (a) 101 percent of their principal
amount, together with accrued and unpaid interest, if any, to the date of purchase, upon the occurrence of certain change of control
events and (b) 100 percent of their principal amount, together with accrued and unpaid interest, if any, to the date of purchase, with the
proceeds from certain asset dispositions. These restrictions and prohibitions are subject to certain qualifications and exceptions set
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making acquisitions or other investments;
prepaying, redeeming or repurchasing certain indebtedness;
selling or otherwise disposing of assets;
selling stock of our subsidiaries;
incurring liens;
entering into transactions with affiliates;
entering into agreements restricting our subsidiaries’ ability to pay dividends;
entering into transactions that result in a change of control of us; and
consolidating, merging or selling all or substantially all of our assets.
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
forth in the Indenture, including without limitation, reinvestment rights with respect to the proceeds of asset dispositions. Chemours is
permitted to redeem some or all of the 2023 Notes and Euro Notes by paying a “make-whole” premium prior to May 15, 2018, and on or
after May 15, 2018 and thereafter at specified redemption prices. Chemours may redeem some or all of the 2025 Notes on or after
May 15, 2020 at specified redemption prices. Chemours may also redeem some or all of the 2023 Notes and Euro Notes by means
other than a redemption, including tender offer and open market repurchases.
Term Loans and Notes Repayments
During the year ended December 31, 2016, the Company repurchased or repaid portions of
Loans”), 2023 Notes and Euro Notes with aggregate principal and cash payment amounts as follows:
its senior secured term loans (“Term
The Chemours Company
The agreements governing our indebtedness restrict our current and future operations, particularly our ability to respond to
changes or to take certain actions.
The agreements governing our indebtedness, including the notes, contain, and the agreements governing future indebtedness and
future debt securities may contain, significant restrictive covenants and,
in the case of
the Revolving Credit Facility,
financial
maintenance covenants that will
limit our operations, including our ability to engage in activities that may be in our long-term best
interests. These restrictive covenants may limit us, and our restricted subsidiaries, from taking, or give rights to the holders of our
indebtedness in the event of the following actions:
incurring additional indebtedness and guaranteeing indebtedness;
paying dividends or making other distributions in respect of, or repurchasing or redeeming, our capital stock;
Term Loans(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Euro Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31, 2016
Aggregate
Principal
Cash
Payment
$
$
$
105
192
73
370
$
104
182
68
354
(1) The Term Loans aggregate principal amounts exclude the required quarterly installment repayments equivalent to $15 per year.
For the year ended December 31, 2016, we recorded in “Interest expense, net” of the Consolidated Statements of Operations a net
gain on extinguishment of debt of $10, net of approximately $5 charges related to the write-off of deferred financing costs associated
with the extinguished debt.
Maturities
Risks Related to the Separation
Our failure to comply with those covenants could result in an event of default that, if not cured or waived, could result in the acceleration
of some or all of our indebtedness, which could lead us to bankruptcy, reorganization or insolvency.
Chemours has required quarterly principal payments related to the Term Loan Facility equivalent to 1.00% per annum through
March 2022, with the balance due at maturity. Term Loan principal maturities over the next five years are $15 in each year from 2017 to
2021. Debt maturities related to the Term Loan Facility and the Notes in 2022 and beyond will be $3,513.
In addition, following the end of each fiscal year commencing on the year ended December 31, 2016, the Company is also required to
make additional principal repayments, depending on leverage levels as defined in the credit agreement, equivalent to up to 50% of
excess cash flow based on certain leverage targets with stepdowns to 25% and 0% as actual leverage decreases to below 3.00 to 1.00
leverage target.
Debt Fair Value
The fair values of
the Term Loan Facility, the 2023 notes, the 2025 notes and the 2023 Euro notes at December 31, 2016 were
approximately $1,370, $1,149, $739 and $305, respectively. The estimated fair values of the Term Loan Facility and the Notes are
based on quotes received from third party brokers, and are classified as Level 2 in the fair value hierarchy.
Note 20. Commitments and Contingent Liabilities
Guarantees
(a) Obligations for Equity Affiliates and Others
Chemours has directly guaranteed various obligations of customers, suppliers and other third parties. At December 31, 2016 and
December 31, 2015, Chemours had directly guaranteed less than $1 and $8 of such obligations, respectively. These represent the
maximum potential amount of future (undiscounted) payments that Chemours could be required to make under the guarantees in the
event of default by the guaranteed parties. No amounts were accrued at December 31, 2016 and 2015.
Chemours assesses the payment and performance risk by assigning default rates based on the duration of
the guarantees. These
default rates are assigned based on the external credit rating of the counterparty or through internal credit analysis and historical default
We may be unable to achieve some or all of the benefits that we expected to achieve from our separation from DuPont.
As an independent, publicly-traded company, we continue to, among other things, focus our financial and operational resources on our
specific business, growth profile and strategic priorities, design and implement corporate strategies and policies targeted to our
operational focus and strategic priorities, guide our processes and infrastructure to focus on our core strengths, implement and maintain
a capital structure designed to meet our specific needs and more effectively respond to industry dynamics, all of which are benefits we
expected to achieve from our separation. However, we may be unable to fully achieve some or all of these benefits. For example, in
order to position ourselves for the separation and distribution, we undertook a series of strategic, structural and process realignment
and restructuring actions within our operations. These actions may not provide the benefits we expected, and could lead to disruption of
our operations, loss of, or inability to recruit, key personnel needed to operate and grow our businesses following the separation and
distribution, weakening of our internal standards, controls or procedures and impairment of our key customer and supplier relationships.
If we fail to achieve some or all of the benefits that we expected to achieve as an independent company, or do not achieve them in the
time we expected, our business, financial condition and results of operations could be materially and adversely affected.
If the distribution, together with certain related transactions, were to fail to qualify for non-recognition treatment for U.S.
federal income tax purposes, then we could be subject to significant tax and indemnification liability and stockholders
receiving our common stock in the distribution could be subject to significant tax liability.
DuPont received a ruling from the IRS substantially to the effect that, among other things, the distribution qualified as a tax-free
transaction under Section 355 and Section 368(a)(1)(D) of
the Internal Revenue Code (the Code). The tax-free nature of
the
distribution was conditioned on the continued validity of the IRS Ruling, as well as on receipt of a tax opinion, in form and substance
acceptable to DuPont, substantially to the effect that, among other things, the distribution would qualify as a tax-free transaction under
Section 355 and Section 368(a)(1)(D) of the Code, and certain transactions related to the transfer of assets and liabilities to us in
connection with the separation and distribution would not result
in the recognition of any gain or loss to DuPont, us or our
stockholders. The IRS Ruling and the tax opinion relied on certain facts, assumptions, and undertakings, and certain representations
from DuPont and us, regarding the past and future conduct of both respective businesses and other matters, and the tax opinion relies
on the IRS Ruling. Notwithstanding the IRS Ruling and the tax opinion, the IRS could determine that the distribution or such related
transactions should be treated as a taxable transaction if
it determines that any of
these facts, assumptions, representations, or
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
history for counterparties that do not have published credit ratings. For counterparties without an external rating or available credit history,
a cumulative average default rate is used.
(b) Operating Leases
Chemours uses various leased facilities and equipment in its operations. The terms for these leased assets vary depending on the
lease agreement. Future minimum lease payments (including residual value guarantee amounts) under non-cancelable operating
leases are $62, $53, $46, $23 and $31 for the years ended December 31, 2017, 2018, 2019, 2020 and 2021, respectively, and $43 for
the years thereafter. Net rental expense under operating leases was $68, $83 and $75 during the years ended December 31, 2016,
2015 and 2014, respectively.
Asset Retirement Obligations
Chemours has recorded asset retirement obligations primarily associated with closure, reclamation and removal costs for mining
operations related to the production of TiO2 in the Titanium Technologies segment. A summary of the changes in asset retirement
obligations is as follows:
(Dollars in millions)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements/payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
Year Ended December 31,
2015
2016
42
2
(1)
43
2
41
$
$
$
$
43
1
(2)
42
1
41
Litigation
the normal course of
the Chemours business including product
In addition to the matters discussed below, Chemours, by virtue of its status as a subsidiary of DuPont prior to the separation, is subject
to or required under the separation-related agreements executed prior to the separation to indemnify DuPont against various pending
legal proceedings arising out of
intellectual property,
commercial, environmental and antitrust lawsuits. It is not possible to predict the outcome of these various proceedings. Except for the
PFOA litigation for which a separate assessment is provided in this Note, while management believes it is reasonably possible that
Chemours could incur losses in excess of the amounts accrued, if any, for the aforementioned proceedings, it does not believe any
such loss would have a material impact on Chemours’ consolidated financial position, results of operations or liquidity. With respect to
the litigation matters discussed below, including PFOA multi-district litigation (“MDL”), management’s estimate of the probability of loss
in excess of the amounts accrued, if any, is addressed individually for each matter. In the event that DuPont seeks indemnification for
adverse trial rulings or outcomes for any such matter relating to PFOA, these indemnification claims could materially adversely affect
Chemours’ financial condition. Disputes between Chemours and DuPont may also arise with respect to indemnification matters,
including disputes based on matters of law or contract interpretation. If and to the extent these disputes arise, they could materially
adversely affect Chemours.
liability,
any event of default or declaration of acceleration under any other of our outstanding indebtedness may also contain a cross-default
(a) Asbestos
At December 31, 2016 and 2015, there were approximately 1,900 lawsuits and 2,200 lawsuits, respectively, pending against DuPont
alleging personal injury from exposure to asbestos. These cases are pending in state and federal court in numerous jurisdictions in the
the actions were brought by
U.S. and are individually set for trial. A small number of cases are pending outside the U.S. Most of
contractors who worked at sites between 1950 and the 1990s. A small number of cases involve similar allegations by DuPont
employees. A limited number of the cases were brought by household members of contractors or DuPont employees. Finally, certain
lawsuits allege personal injury as a result of exposure to DuPont products.
At December 31, 2016 and 2015, Chemours had an accrual of $41 and $44 related to this matter, respectively. Chemours reviews this
estimate and related assumptions quarterly. Management believes that the likelihood is remote that Chemours would incur losses in
excess of the amounts accrued in connection with this matter.
24
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The Chemours Company
more detailed discussion, see risk factor “We agreed to numerous restrictions to preserve the tax-free treatment of the transactions in
the U.S., which may reduce our strategic and operating flexibility.” If we are unable to raise additional capital when needed, our financial
condition could be materially and adversely affected.
Additionally, our failure to maintain the credit ratings on our debt securities, including the notes, could negatively affect our ability to
access capital and could increase our interest expense on future indebtedness. We expect the credit rating agencies to periodically
review our capital structure and the quality and stability of our earnings. Deterioration in our capital structure or the quality and stability
of our earnings could result in a downgrade of the credit ratings on our debt securities. Any negative rating agency actions could
constrain the capital available to us, reduce or eliminate available borrowing to us and could limit our access to and/or increase the cost
of funding our operations. If, as a result, our ability to access capital when needed becomes constrained, our interest costs could
increase, which could have material adverse effect on our results of operations, financial condition and cash flows.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to
increase significantly.
Our borrowings under the Senior Secured Credit Facilities are at variable rates and expose us to interest rate risk. As a result, if interest
rates increase, our debt service obligations under the Senior Secured Credit Facilities or other variable rate debt would increase even
though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our
indebtedness, would correspondingly decrease. As of December 31, 2016, we had approximately $1.4 billion of our outstanding debt at
variable interest rates.
We may be unable to service our indebtedness, including the notes.
Our ability to make scheduled payments on and to refinance our indebtedness, including the notes, depends on and is subject to our
financial and operating performance, which in turn is affected by general and regional economic, financial, competitive, business and
other factors (many of which are beyond our control), including the availability of financing in the international banking and capital
markets. We cannot be certain that our business will generate sufficient cash flow from operations or that future borrowings will be
available to us in an amount sufficient to enable us to service our debt, including the notes, to refinance our debt or to fund our other
liquidity needs.
If we are unable to meet our debt service obligations or to fund our other liquidity needs, we will need to restructure or refinance all or a
portion of our debt, including the notes. Failure to successfully restructure or refinance our debt could cause us to default on our debt
obligations and would impair our liquidity. Our ability to restructure or refinance our debt will depend on the condition of the capital
markets and our financial condition at such time. Any refinancing of our indebtedness could be at higher interest rates and may require
us to comply with more onerous covenants that could further restrict our business operations.
Moreover, in the event of a default of our debt service obligations, the holders of the applicable indebtedness, including the notes and
the Senior Secured Credit Facilities, could elect to declare all the funds borrowed to be due and payable, together with accrued and
unpaid interest. We cannot be certain that our assets or cash flows would be sufficient to fully repay borrowings under our outstanding
debt instruments if accelerated upon an event of default. First, a default in our debt service obligations in respect of the notes would
result in a cross default under the Senior Secured Credit Facilities. The foregoing would permit the lenders under the Revolving Credit
Facility to terminate their commitments thereunder and cease making further loans, and would allow the lenders under the Senior
Secured Credit Facilities to declare all
loans immediately due and payable and to institute foreclosure proceedings against their
collateral, which could force us into bankruptcy or liquidation. Second, any event of default or declaration of acceleration under the
Senior Secured Credit Facilities or any other agreements relating to our outstanding indebtedness under which the total amount of
outstanding indebtedness exceeds $100 million could also result in an event of default under the indenture governing the notes, and
provision. Any such default, event of default or declaration of acceleration could materially and adversely affect our results of operation
and financial condition.
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
(b) Benzene
In the separation, DuPont assigned its Benzene docket to Chemours. At December 31, 2016 and 2015, there are 27 and 29 cases
pending against DuPont alleging benzene-related illnesses. These cases consist of premises matters involving contractors and
deceased former employees who claim exposure to benzene while working at DuPont sites primarily in the 1960s through the 1980s,
and product liability claims based on alleged exposure to benzene found in trace amounts in aromatic hydrocarbon solvents used to
manufacture DuPont products, such as paints, thinners and reducers.
sanctions and fines.
Risks Related to Our Indebtedness
Through DuPont, Chemours has received a claim by Phillips66 for indemnity and defense for three matters arising at a former DuPont /
Conoco Texas site. Phillips66 seeks reimbursement for its settlement and fees in one matter and assumption of the defense in two
matters.
A benzene case (Hood v. DuPont) was tried to a verdict in Texas state court on October 20, 2015. Plaintiffs alleged that Mr. Hood’s
Acute Myelogenous Leukemia (AML) was the result of 24 years of occupational exposure to trace benzene found in DuPont automotive
paint products and that DuPont negligently failed to warn him that its paints, reducers and thinners contained benzene that could cause
cancer or leukemia. The jury found in the Plaintiffs favor awarding $6.9 in compensatory damages and $1.5 in punitive damages. In
March 2016, acting on the Company’s motion, the Court struck the punitive award. Through DuPont, Chemours has filed an appeal on
the remaining award based upon substantial errors made at the trial court level. Plaintiffs have filed a cross appeal.
Management believes that a loss is reasonably possible related to these matters; however, given the evaluation of each Benzene matter
is highly fact driven and impacted by disease, exposure and other factors, a range of such losses cannot be reasonably estimated at
this time.
(c) PFOA
Prior to the fourth quarter of 2014, the performance chemicals segment of DuPont made PFOA (collectively, perfluorooctanoic acids
and its salts, including the ammonium salt) at its Fayetteville plant (Fayetteville, North Carolina) and used PFOA as a processing aid in
the manufacture of fluoropolymers and fluoroelastomers at certain sites including: Washington Works (Parkersburg, West Virginia),
Chambers Works (Deepwater, New Jersey), Dordrecht Works (Netherlands), Changshu Works (China), and Shimizu (Japan). These
sites are now owned and/or operated by Chemours.
Chemours recorded accruals of $349 and $20 related to the PFOA matters discussed below at December 31, 2016 and 2015,
respectively. In the fourth quarter of 2016, the Company recorded an approximately $335 accrual related to the PFOA MDL settlement,
which is further discussed below.
The accruals also include charges related to DuPont’s obligations under agreements with the U.S. Environmental Protection Agency
(EPA) and voluntary commitments to the New Jersey Department of Environmental Protection (NJDEP). These obligations and
voluntary commitments include surveying, sampling and testing drinking water in and around certain company sites offering treatment
or an alternative supply of drinking water if tests indicate the presence of PFOA in drinking water at or greater than the national Health
Advisory. A provisional health advisory level was set in 2009 at 0.4 parts per billion (ppb) that includes PFOA in drinking water. In
May 2016, the EPA announced a health advisory level of 0.07 ppb that includes PFOA in drinking water. As a result, we recorded an
additional $4 in the second quarter of 2016 based on management’s best estimate of the impact of the new health advisory level on the
company’s obligations to the EPA, which have expanded the testing and water supply commitments previously established. Based on
prior testing, the Company has initiated additional testing and treatment in certain additional locations in and around Chambers Works
and Washington Works plants. The Company will continue to work with the EPA regarding the extent of work that may be required with
respect to these matters.
The Chemours Company
remedial measures. Investigations of alleged violations can be very expensive, disruptive, and damaging to our reputation. Although we
have implemented anti-corruption policies and procedures since the separation, there can be no guarantee that these policies,
procedures, and training will effectively prevent violations by our employees or representatives in the future. Additionally, we face a risk
that our distributors and other business partners may violate the FCPA, the Bribery Act or similar laws or regulations. Such violations
could expose us to FCPA and Bribery Act liability and/or our reputation may potentially be harmed by their violations and resulting
•
•
•
•
•
•
•
•
•
Our significant indebtedness could adversely affect our financial condition, and we could have difficulty fulfilling our
obligations under our indebtedness, which may have a material adverse effect on us.
As of December 31, 2016, we had approximately $3.6 billion of indebtedness. At December 31, 2016, together with the guarantors, we
had approximately $1.4 billion of senior secured indebtedness outstanding, and had an additional $750 million of capacity under the
Revolving Credit Facility, all of which would be senior secured indebtedness if drawn. Our significant level of indebtedness increases
the risk that we may be unable to generate cash sufficient to pay amounts due in respect of our indebtedness. The level of our
indebtedness could have other important consequences on our business, including:
making it more difficult for us to satisfy our obligations with respect to indebtedness;
increasing our vulnerability to adverse changes in general economic, industry and competitive conditions;
requiring us to dedicate a significant portion of our cash flow from operations to make payments on our indebtedness, thereby
reducing the availability of our cash flow to fund working capital and other general corporate purposes;
limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
restricting us from capitalizing on business opportunities;
placing us at a competitive disadvantage compared to our competitors that have less debt;
limiting our ability to borrow additional funds for working capital, acquisitions, debt service requirements, execution of our
business strategy or other general corporate purposes;
limiting our ability to enter into certain commercial arrangements because of concerns of counterparty risks; and
limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our
competitors that have less debt.
The occurrence of any one or more of these circumstances could have a material adverse effect on us.
Despite our significant level of
indebtedness, we may be able to incur substantially more debt and enter into other
transactions which could further exacerbate the risks to our financial condition described above.
Notwithstanding our significant level of indebtedness, we may be able to incur significant additional indebtedness in the future, including
additional secured indebtedness that would be effectively senior to the notes (including up to $750 million of available capacity under
the Revolving Credit Facility). Although the indenture that governs the notes and the credit agreement that governs the Senior Secured
Credit Facilities contain restrictions on our ability to incur additional indebtedness and to enter into certain types of other transactions,
these restrictions are subject to a number of significant qualifications and exceptions. Additional indebtedness incurred in compliance
with these restrictions, including secured indebtedness, could be substantial. These restrictions also do not prevent us from incurring
obligations, such as trade payables, that do not constitute indebtedness as defined under our debt instruments. To the extent such new
debt is added to our current debt levels, the substantial leverage risks described in the immediately preceding risk factor would increase.
Drinking Water Actions
We may need additional capital in the future and may not be able to obtain it on favorable terms.
In August 2001, a class action, captioned Leach v. DuPont, was filed in West Virginia state court alleging that residents living near the
Washington Works facility had suffered, or may suffer, deleterious health effects from exposure to PFOA in drinking water.
DuPont and attorneys for the class reached a settlement in 2004 that binds about 80,000 residents. In 2005, DuPont paid the plaintiffs’
attorneys’ fees and expenses of $23 and made a payment of $70, which class counsel designated to fund a community health project.
Chemours, through DuPont, funded a series of health studies which were completed in October 2012 by an independent science panel
of experts (the C8 Science Panel). The studies were conducted in communities exposed to PFOA to evaluate available scientific
Our industry is capital intensive, and we may require additional capital in the future to finance our growth and development, implement
further marketing and sales activities, fund ongoing research and development activities and meet general working capital needs. Our
capital requirements will depend on many factors, including acceptance of and demand for our products, the extent to which we invest
in new technology and research and development projects, and the status and timing of
these developments, as well as general
availability of capital from debt and/or equity markets.
However, debt or equity financing may not be available to us on terms we find acceptable, if at all. Also, regardless of the terms of
our debt or equity financing, our agreements and obligations under the tax matters agreement may limit our ability to issue stock. For a
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The Chemours Company
Our customers, prospective customers, suppliers or other companies with whom we conduct business may need assurances
that our financial stability is sufficient to satisfy their requirements for doing or continuing to do business with them.
Some of our customers, prospective customers, suppliers or other companies with whom we conduct business may need assurances
that our financial stability is sufficient to satisfy their requirements for doing or continuing to do business with them, and may require us
to provide additional credit support, such as letters of credit or other financial guarantees. Any failure of parties to be satisfied with our
financial stability could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We are a holding company that is dependent on cash flows from our operating subsidiaries to fund our debt obligations,
capital expenditures and ongoing operations.
All of our operations are conducted and all of our assets are owned by our operating companies, which are our subsidiaries. We intend
to continue to conduct our operations at the operating companies and any future subsidiaries. Consequently, our cash flow and our
ability to meet our obligations or make cash distributions depends upon the cash flow of our operating companies and any future
subsidiaries, and the payment of funds by our operating companies and any future subsidiaries in the form of dividends or otherwise.
The ability of our operating companies and any future subsidiaries to make any payments to us depends on their earnings, the terms of
their indebtedness, including the terms of any credit facilities, and legal restrictions regarding the transfer of funds.
Our debt is generally the exclusive obligation of The Chemours Company and our guarantor subsidiaries. Because a significant portion
of our operations are conducted by nonguarantor subsidiaries, our cash flow and our ability to service indebtedness, including our
ability to pay the interest on our debt when due and principal of such debt at maturity, are dependent to a large extent upon cash
dividends and distributions or other transfers from such nonguarantor subsidiaries. Any payment of dividends, distributions, loans or
advances by our nonguarantor subsidiaries to us could be subject to restrictions on dividends or repatriation of earnings under
applicable local
law, monetary transfer restrictions and foreign currency exchange regulations in the jurisdictions in which our
subsidiaries operate, and any restrictions imposed by the current and future debt instruments of our nonguarantor subsidiaries. In
addition, payments to us by our subsidiaries are contingent upon our subsidiaries’ earnings.
Our subsidiaries are separate legal entities and, except for our guarantor subsidiaries, have no obligation, contingent or otherwise, to
pay any amounts due on our debt or to make any funds available for those amounts, whether by dividends, loans, distributions or other
payments, and do not guarantee the payment of interest on, or principal of, our debt. Any right that we have to receive any assets of any
of our subsidiaries that are not guarantors upon the liquidation or reorganization of any such subsidiary, and the consequent right of
holders of notes to realize proceeds from the sale of their assets, will be structurally subordinated to the claims of that subsidiary’s
creditors, including trade creditors and holders of debt issued by that subsidiary.
If our long-lived assets become impaired, we may be required to record a significant charge to earnings.
We have a significant amount of long-lived assets on our consolidated balance sheet. Under U.S. GAAP, we review our long-lived assets
for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Factors that may be
considered a change in circumstances, indicating that the carrying value of our long-lived assets may not be recoverable, include, but
are not limited to, changes in the industries in which we operate, particularly the impact of a downturn in the global economy, as well as
competition or other factors leading to reduction in expected long-term sales or profitability. We may be required to record a significant
noncash charge in our financial statements during the period in which any impairment of our long-lived assets is determined, negatively
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
evidence on whether any probable link exists, as defined in the settlement agreement, between exposure to PFOA and human disease.
found probable links, as defined in the settlement agreement, between exposure to PFOA and
The C8 Science Panel
pregnancy-induced hypertension,
thyroid disease, ulcerative colitis and
diagnosed high cholesterol.
including preeclampsia, kidney cancer,
testicular cancer,
In May 2013, a panel of three independent medical doctors released its initial recommendations for screening and diagnostic testing of
eligible class members. In September 2014, the medical panel recommended follow-up screening and diagnostic testing three years
after initial testing, based on individual results. The medical panel has not communicated its anticipated schedule for completion of its
protocol. Through DuPont, Chemours is obligated to fund up to $235 for a medical monitoring program for eligible class members and,
in addition, administrative cost associated with the program, including class counsel fees. In January 2012, Chemours, through DuPont,
put $1 in an escrow account to fund medical monitoring as required by the settlement agreement. The court-appointed Director of
Medical Monitoring has established the program to implement the medical panel’s recommendations and the registration process, as
well as eligibility screening, is ongoing. Diagnostic screening and testing has begun and associated payments to service providers are
being disbursed from the escrow account. As of December 31, 2016, less than $1 has been disbursed from the escrow account related
to medical monitoring.
In addition, under the settlement agreement, DuPont must continue to provide water treatment designed to reduce the level of PFOA in
water to six area water districts and private well users. At separation, this obligation was assigned to Chemours, which is included in the
accrual amounts recorded as of December 31, 2016.
Class members may pursue personal injury claims against DuPont only for those human diseases for which the C8 Science Panel
determined a probable link exists. At December 31, 2016 and 2015, there were approximately 3,500 lawsuits filed in various federal and
state courts in Ohio and West Virginia, an increase of approximately 600 over year end 2014. These lawsuits are consolidated in an
MDL in Ohio federal court. Based on the information currently available to the Company, the majority of the lawsuits allege personal
injury claims associated with high cholesterol and thyroid disease from exposure to PFOA in drinking water. There are 30 lawsuits
alleging wrongful death.
Although the majority of the plaintiffs in the MDL allege multiple diseases, the table below approximates the number of plaintiffs in each
of the six probable link disease categories.
Alleged Injury
Kidney cancer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Testicular cancer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ulcerative colitis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preeclampsia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thyroid disease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
High cholesterol
Approximate
Number of
Plaintiffs
200
70
300
200
1,430
1,340
impacting our results of operations.
In the third quarter of 2014, six plaintiffs from the MDL were selected for individual bellwether trials.
Our failure to comply with the anti-corruption laws of
the United States and various international
jurisdictions could
Settlement of MDL between DuPont and MDL Plaintiffs
negatively impact our reputation and results of operations.
Doing business on a global basis requires us to comply with the laws and regulations of the U.S. government and those of various
international and sub-national jurisdictions, and our failure to successfully comply with these rules and regulations may expose us to
liabilities. These laws and regulations apply to companies, individual directors, officers, employees and agents, and may restrict our
operations, trade practices, investment decisions and partnering activities. In particular, our international operations are subject to U.S.
and foreign anti-corruption laws and regulations, such as the U.S. Foreign Corrupt Practices Act (the “FCPA”), the United Kingdom
Bribery Act 2010 (the “Bribery Act”) as well as anti-corruption laws of the various jurisdictions in which we operate. The FCPA, the
Bribery Act and other laws prohibit us and our officers, directors, employees and agents acting on our behalf from corruptly offering,
promising, authorizing or providing anything of value to foreign officials for the purposes of
influencing official decisions or
obtaining or retaining business or otherwise obtaining favorable treatment. Our global operations may expose us to the risk of
violating, or being accused of violating, the foregoing or other anti-corruption laws. Such violations could be punishable by criminal
fines, imprisonment, civil penalties, disgorgement of profits, injunctions and exclusion from government contracts, as well as other
On February 11, 2017, DuPont entered into an agreement in principle with plaintiffs’ counsel representing the MDL plaintiffs providing
for a global settlement of all cases and claims in the MDL, including all filed and unfiled personal injury cases and claims that are part of
the plaintiffs’ counsel’s claim inventory, as well as cases that have been tried to a jury verdict (the “MDL Settlement”). The total
settlement amount is $670.7 million dollars in cash, half of which will be paid by Chemours and half paid by DuPont. DuPont’s payment
would not be subject to indemnification or reimbursement by Chemours, and Chemours has accrued $335 million associated with this
matter at December 31, 2016. In exchange for payment of the total settlement amount, DuPont and Chemours will receive a complete
release of all claims by the settling plaintiffs. The MDL Settlement was entered into solely by way of compromise and settlement and is
not in any way an admission of liability or fault by DuPont or Chemours. The MDL Settlement is not subject to court approval; however,
the MDL Settlement may not proceed in certain conditions, including a walk-away right that enables DuPont to terminate the MDL
Settlement if more than a specified number of plaintiffs determine not to participate. In connection with the MDL Settlement, DuPont
and MDL plaintiffs’ counsel have sought a stay (the “Stay of MDL Litigation”) of all judicial proceedings related to this action in the
federal district court and in the U.S. Court of Appeals for the Sixth Circuit. If the MDL Settlement is terminated or otherwise does not
proceed, additional lawsuits may go to trial or appeal.
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Litigation and Procedural Posture Prior to Stay of MDL Litigation
All six bellwether cases in the MDL have now been tried, resolved, appealed or otherwise addressed. Two bellwether cases have been
tried. The first case (Bartlett v. DuPont / kidney cancer) was tried to a verdict in October 2015. The jury found in favor of the plaintiff,
awarding $1.1 in damages for negligence and $0.5 for emotional distress. The jury found that DuPont’s conduct did not warrant punitive
damages. A second case (Freeman v. DuPont / testicular cancer) was tried to verdict in July 2016. The jury found in favor of the plaintiff
awarding $5.1 in compensatory damages and $0.5 in punitive damages and attorneys’ fees. Plaintiff’s counsel alleges that they are
entitled to at least $6.9 in attorneys’ fees and costs for the Freeman trial. Absent the Stay of MDL Litigation, the Court would make a
determination after post-trial submissions by the parties. The Court’s determination would be subject to appeal. Court rulings made
before and during both trials resulted in several significant grounds for appeal and an appeal to the Sixth Circuit has been filed for the
first case. Oral argument on the appeal of the first case was held in December 2016. The Company, through DuPont, is pursuing
post-trial motions and appeals for the second case.
Three bellwether PFOA cases were settled in 2016 as trial approached. These cases (Wolf v. DuPont / ulcerative colitis, Dowdy v.
DuPont / kidney cancer, Baker v. DuPont / kidney cancer) were settled for amounts well below the incremental cost of preparing for
trials. To date, the settlements have been individually and in aggregate immaterial to the Company. The final case (Pugh v. DuPont /
ulcerative colitis) was removed from the bellwethers when it was determined that the plaintiff did not suffer from the alleged disease.
The trial court announced that, starting in May 2017, 40 individual plaintiff trials will be scheduled for a 12-month period. Following the
conclusion of the six bellwether cases, on July 19, 2016, the court moved two of the 40 matters (Vigneron v. DuPont / testicular cancer
and Moody v. DuPont / testicular cancer) forward and set the cases for trial on November 14, 2016 and January 17, 2017, respectively.
The trial court’s multi-year plan pertains only to the approximately 270 cases claiming cancer. Based on the current plan, the remaining
cases, comprising approximately 93% of the docket, will remain inactive.
The November 2016 trial (Vigneron v. DuPont / testicular cancer) resulted in a verdict in favor of the Plaintiff for $2 in compensatory
damages, $10.5 in punitive damages, and attorney’s fees and costs. Absent the Stay of MDL Litigation, the Company, through DuPont,
will pursue post-trial motions and appeals. The January 2017 trial (Moody v. DuPont / testicular cancer) commenced in the first quarter
of 2017 but was stayed pending the MDL Settlement and its implementation.
A confidential mediation process was established by the court early in this MDL.
Chemours, through DuPont, denies the allegations in these lawsuits and is defending itself vigorously. The MDL Settlement was entered
into solely by way of compromise and settlement and is not in any way an admission of liability or fault by DuPont or Chemours. No
other claims in the MDL have been settled or resolved during the periods presented.
Settlement between DuPont and Chemours related to MDL
is exceeded, DuPont would pay any excess amount up to the next $25 million (which payment will not be subject
DuPont and Chemours have also agreed, subject to and following the completion of
the MDL Settlement, to a limited sharing of
potential future PFOA liabilities (i.e., “indemnifiable losses,” as defined in the separation agreement between DuPont and Chemours) for
a period of five years. During that five-year period, Chemours would annually pay future PFOA liabilities up to $25 million and, if such
amount
to
indemnification by Chemours), with Chemours annually bearing any further excess liabilities under the terms of
the separation
agreement. After the five-year period, this limited sharing agreement would expire, and Chemours’ indemnification obligations under the
separation agreement would continue unchanged. Chemours has also agreed that, upon the MDL Settlement becoming effective, it will
not contest its liability to DuPont under the separation agreement for PFOA liabilities on the basis of ostensible defenses generally
applicable to the indemnification provisions under the separation agreement, including defenses relating to punitive damages, fines or
penalties or attorneys’ fees, and waives any such defenses with respect to PFOA liabilities. Chemours has, however, retained defenses
as to whether any particular PFOA claim is within the scope of the indemnification provisions of the separation agreement.
PFOA Summary
While it is probable that the Company will incur costs related to the medical monitoring program discussed above, such costs cannot be
reasonably estimated due to uncertainties surrounding the level of participation by eligible class members and the scope of testing.
Chemours has accrued $335 million associated with the MDL Settlement at December 31, 2016.
The Chemours Company
In connection with our separation, we were required to enter into numerous separation-related and commercial agreements
with our former parent company, DuPont, which may not reflect optimal or commercially beneficial terms to Chemours.
Commercial agreements we entered into with DuPont in connection with the separation were negotiated in the context of the separation
while we were still a wholly-owned subsidiary of DuPont. Accordingly, during the period in which the terms of those agreements were
negotiated, we did not have an independent board of directors or management
independent of DuPont. Certain commercial
agreements, having long terms and commercially advantageous cancellation and assignment rights to DuPont, may not include
adjustments for changes in industry and market conditions. There is a risk that the pricing and other terms under these agreements may
not be commercially beneficial and may not be able to be renegotiated in the future. The terms relate to, among other things, the
allocation of assets, liabilities, rights and obligations, including the provision of products and services and the sharing and operation of
property, manufacturing, office and laboratory sites, and other commercial rights and obligations between DuPont and us.
We may be unable to make, on a timely or cost-effective basis, the changes necessary to operate efficiently as an independent
company.
There is a risk that, since separating from DuPont, we are more susceptible to market fluctuations and other adverse events than we
would have been if we were still a part of DuPont’s organizational structure. As part of DuPont, we were able to enjoy certain benefits
from DuPont’s operating diversity, purchasing power and opportunities to pursue integrated strategies with DuPont’s other businesses.
As an independent, publicly traded company, we do not have similar diversity or integration opportunities and do not have similar
purchasing power or access to capital markets. Additionally, as part of DuPont, we were able to leverage the DuPont historical market
reputation and performance and brand identity to recruit and retain key personnel to run our business. As an independent, publicly
traded company, we do not have the same historical market reputation and performance or brand identity as DuPont and it may be more
difficult for us to recruit or retain such key personnel.
Our ability to make future strategic decisions regarding our manufacturing operations are subject
to regulatory,
environmental, political, legal and economic risks, and to certain extent may be subject to consents or cooperation from
DuPont under the agreements entered into between us and DuPont as part of the separation. These could adversely affect our
ability to execute our future strategic decisions and our results of operations and financial condition.
One of the ways we may improve our business is through the expansion or improvement of our existing facilities, such as the expansion
of our Altamira TiO2 facility and the planned expansions for our Opteon™ refrigerant and our Mining Solutions facility. Construction of
additions or modifications to facilities involves numerous regulatory, environmental, political, legal and economic uncertainties that are
beyond our control. Such expansion or improvement projects may also require the expenditure of significant amounts of capital, and
financing may not be available on economically acceptable terms or at all. As a result, these projects may not be completed on
schedule, at the budgeted cost, or at all. Moreover, our revenue may not increase immediately upon the expenditure of funds on a
particular project. As a result, we may not be able to realize our expected investment return, which could adversely affect our results of
operations and financial condition.
We periodically assess our manufacturing operations in order to manufacture and distribute our products in the most efficient manner.
Based on our assessments, we may make strategic decisions regarding our manufacturing operations such as capital improvements to
modernize certain units, move manufacturing or distribution capabilities from one plant or facility to another plant or facility, discontinue
manufacturing or distributing certain products or close or divest all or part of a manufacturing plant or facility, some of which have
significant shared services and lease agreements with DuPont. These agreements may adversely impact our ability to take these
strategic decisions regarding out manufacturing operations. Further, if such agreements are terminated or revised, we would have to
assess and potentially adjust our manufacturing operations, the closure or divestiture of all or part of a manufacturing plant or facility
that could result in future charges that could be significant.
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The Chemours Company
or expensive for us to develop and commercialize certain new products and services, or may result in certain of our products or
services being later to market than those of our competitors.
If we are unable to innovate and successfully introduce new products, or new technologies or processes reduce the demand
for our products or the price at which we can sell products, our profitability could be adversely affected.
Our industries and the end-use markets into which we sell our products experience periodic technological change and product
improvement. Our future growth will depend on our ability to gauge the direction of commercial and technological progress in key
end-use markets and on our ability to fund and successfully develop, manufacture and market products in such changing end-use
markets. We must continue to identify, develop and market innovative products or enhance existing products on a timely basis to
maintain our profit margins and our competitive position. We may be unable to develop new products or technology, either alone or with
third parties, or license intellectual property rights from third parties on a commercially competitive basis. If we fail to keep pace with the
evolving technological innovations in our end-use markets on a competitive basis, including with respect to innovation with regard to the
development of alternative uses for, or application of, products developed that utilize such end-use products, our financial condition and
results of operations could be adversely affected. We cannot predict whether technological innovations will, in the future, result in a
lower demand for our products or affect the competitiveness of our business. We may be required to invest significant resources to
adapt to changing technologies, markets, competitive environments and laws and regulations. We cannot anticipate market acceptance
of new products or future products. In addition, we may not achieve our expected benefits associated with new products developed to
meet new laws or regulations if the implementation of such laws or regulations is delayed.
In connection with our separation, we were required to assume, and indemnify DuPont for, certain liabilities. As we are
required to make payments pursuant to these indemnities to DuPont, we may need to divert cash to meet those obligations
and our financial results could be negatively affected. In addition, DuPont’s obligation to indemnify us for certain liabilities
may not be sufficient to insure us against the full amount of liabilities for which it will be allocated responsibility, and DuPont
may not be able to satisfy its indemnification obligations in the future.
Pursuant to the separation agreement, the employee matters agreement, the tax matters agreement and the intellectual property
cross-license agreement we entered into with DuPont prior to the spin-off, we were required to assume, and indemnify DuPont for,
certain liabilities. These indemnification obligations to date have included, among other items, defense costs associated with certain
litigation matters as well as certain damages awards, settlement amounts and penalties. In connection with MDL Settlement described
above under “Our results of operations could be adversely affected by litigation and other commitments and contingencies”, DuPont and
Chemours agreed, subject to and following the completion of
the MDL Settlement, to a limited sharing of potential future PFOA
liabilities (i.e., “indemnifiable losses,” as defined in the separation agreement between DuPont and Chemours) for a period of five years.
During that five-year period, Chemours would annually pay future PFOA liabilities up to $25 million and, if such amount is exceeded,
DuPont would pay any excess amount up to the next $25 million (which payment will not be subject to indemnification by Chemours),
with Chemours annually bearing any further excess liabilities under the terms of the separation agreement. After the five-year period,
this limited sharing agreement would expire, and Chemours’ indemnification obligations under the separation agreement would continue
unchanged. Chemours has also agreed that, upon the MDL Settlement becoming effective, it will not contest its liability to DuPont under
the separation agreement for PFOA liabilities on the basis of ostensible defenses generally applicable to the indemnification provisions
under the separation agreement, including defenses relating to punitive damages, fines or penalties or attorneys’ fees, and waives any
such defenses with respect to PFOA liabilities. Chemours has, however, retained defenses as to whether any particular PFOA claim is
within the scope of
the indemnification provisions of
the separation agreement. Payments pursuant to these indemnities may be
significant and could negatively impact our business, particularly indemnities relating to our actions that could impact the tax-free nature
of the distribution. In addition, in the event that DuPont seeks indemnification for adverse trial rulings or outcomes, these indemnification
claims could materially adversely affect our financial condition. Disputes between Chemours and DuPont may also arise with respect to
indemnification matters, including disputes based on matter of law or contract interpretation. If and to the extent these disputes arise,
they could materially adversely affect us.
Third parties could also seek to hold us responsible for any of
the liabilities of
the DuPont businesses. DuPont has agreed to
indemnify us for such liabilities, but such indemnity from DuPont may not be sufficient to protect us against the full amount of such
liabilities, and DuPont may not be able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in
recovering from DuPont any amounts for which we are held liable, we may be temporarily required to bear these losses ourselves.
Each of these risks could negatively affect our business, financial condition, results of operations and cash flows. See Note 20 to the
Consolidated Financial Statements for further information.
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
If the MDL Settlement does not proceed, any cases stayed or additional lawsuits may go to trial or appeal. An adverse ruling at trial or
on appeal could result in our incurring additional costs and liabilities, which are difficult to estimate beyond accrued amounts and involve
significant uncertainty due to the uniqueness of the individual MDL plaintiff’s claims and the defenses to those claims, both as to
potential liability and damages on an individual claim basis, and numerous unsettled legal issues, among other factors, such as general
versus specific causation, lack of specific fact discovery allowed to date on vast majority of the cases, lack of validation of basic facts
associated with plaintiffs and related claims, and the three cases tried to verdict to date did not inform of the many salient facts and
legal issues needed for assessment of the other cases. The appellate courts will rule on matters that have been tried. The Company
believes there are strong common and individual grounds for appealing these verdicts and, if any such verdict is overturned, any
subsequent verdict relying on such overturned ruling would likely also be overturned. The trials and appeals of the MDL matters will
occur over the course of many years. Significant unfavorable outcomes in a number of cases in the MDL could have a material adverse
effect on Chemours’ consolidated financial position, results of operations or cash flows.
There could also be new lawsuits filed related to DuPont’s use of PFOA, its manufacture of PFOA, or its customers use of DuPont
products that may not be within the scope of the MDL Settlement. Any such new litigation could also result in Chemours incurring
additional costs and liabilities. Management believes it is reasonably possible that the Company could incur losses related to other
PFOA matters in excess of amounts accrued but any such losses are not estimable at this time.
(d) U.S. Smelter and Lead Refinery, Inc.
liabilities. The lawsuits include allegations for personal
Five lawsuits, including two putative class actions, were filed against DuPont by area residents concerning the U.S. Smelter and Lead
Refinery multi-party Superfund site in East Chicago, Indiana. Three of the lawsuits allege that Chemours is now responsible for DuPont
environmental
the Comprehensive
Environmental Response Compensation and Liability Act (“CERCLA”) and damages under the Fair Housing Act (“FHA”). At separation,
DuPont assigned Chemours its former plant site, which is located south of
the Superfund area, and its
responsibility for the environmental remediation at the Superfund site. DuPont has requested that Chemours defend and indemnify it,
and Chemours has agreed to do so under a reservation of rights. Management believes a loss is reasonably possible but not estimable
at this time.
injury damages, damages under
the residential portion of
Environmental
its status as a subsidiary of DuPont prior to the separation,
to
Chemours, by virtue of
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 by Chemours or other parties. Chemours accrues for environmental remediation
activities consistent with the policy set forth in Note 3. Much of this liability results from the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA, often referred to as Superfund), RCRA and similar state and global laws. These laws require
Chemours to undertake certain investigative, remediation and restoration activities at sites where Chemours conducts or once
conducted operations or at sites where Chemours-generated waste was disposed. The accrual also includes estimated costs related to
a number of sites identified for which it is probable that environmental remediation will be required, but which are not currently the
subject of enforcement activities.
to contingencies pursuant
is subject
At December 31, 2016 and 2015, the Consolidated Balance Sheets included a liability relating to these matters of $278 and $297,
respectively, which, in management’s opinion, is appropriate based on existing facts and circumstances. The time-frame for a site to go
through all phases of remediation (investigation and active clean-up) may take about 15 to 20 years, followed by several years of
on-going maintenance and monitoring (“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, diverse regulatory requirements, as well as the presence or absence of other potentially responsible
parties. In addition, for claims that Chemours may be required to indemnify DuPont pursuant to the separation-related agreements,
Chemours, through DuPont, has limited available information for certain sites or is in the early stages of discussions with regulators. For
these sites in particular 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 $535 above the amount accrued at December 31, 2016.
For the years ended December 31, 2016, 2015, and 2014, Chemours incurred environmental remediation expenses of $44, $38, and
$59, respectively.
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Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Based on existing facts and circumstances, 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 the Company’s financial position, results of operations or cash
flows at any given year, as such obligation can be satisfied or settled over many years.
Note 21. Financial Instruments
Derivative Instruments
Objectives and Strategies for Holding Derivative Instruments
In the ordinary course of business, Chemours enters into contractual arrangements (derivatives) to reduce its exposure to foreign
currency risks. The Company has established a derivative program to be utilized for financial risk management. This program reflects
varying levels of exposure coverage and time horizons based on an assessment of risk. The derivative program has procedures
consistent with Chemours’ financial risk management policies and guidelines.
Foreign Currency Forward Contracts
Chemours uses foreign currency forward contracts to reduce its net exposure, by currency,
related to non-functional
currency-denominated monetary assets and liabilities of its operations so that exchange gains and losses resulting from exchange rate
changes are minimized. These derivative instruments are not part of a cash flow hedge program or a fair value hedge program, and
have not been designated as a hedge. Although all of the forward contracts are subject to an enforceable master netting agreement,
Chemours has elected to present the derivative assets and liabilities on a gross basis in the Consolidated Balance Sheets. No collateral
has been required for these contracts. All gains and losses resulting from the revaluation of the derivative assets and liabilities are
recognized in other income, net in the Consolidated Statements of Operations during the period in which they occurred.
At December 31, 2016, there were 45 forward exchange currency contracts outstanding with an aggregate gross notional value of
$518. Chemours recognized a net loss of $15 for the year ended December 31, 2016 and a net gain of $42 for the year ended
December 31, 2015, which is recorded in “other income, net” in the Consolidated Statements of Operations.
Net Investment Hedge — Foreign Currency Borrowings
Beginning on July 1, 2015, Chemours designated its €360 million Euro notes (see Note 19) as a hedge of its net investments in certain
of its international subsidiaries that use the Euro as functional currency in order to reduce the volatility in stockholders’ equity caused by
the changes in foreign currency exchange rates of the Euro with respect to the U.S. Dollar. Chemours uses the spot method to measure
the effectiveness of the net investment hedge. Under this method, for each reporting period, the change in the carrying value of the
Euro notes due to remeasurement of the effective portion is reported in accumulated other comprehensive loss in the Consolidated
Balance Sheet and the remaining change in the carrying value of the ineffective portion, if any, is recognized in other income, net in the
Consolidated Statements of Operations. Chemours evaluates the effectiveness of its net investment hedge quarterly at the beginning of
each quarter. Chemours did not record any ineffectiveness for the year ended December 31, 2016. The Company recognized a gain of
$14 and $8 for the years ended December 31, 2016 and 2015 on its net investment hedges within accumulated other comprehensive
income.
The Chemours Company
Our results of operations and financial condition could be seriously impacted by business disruptions and security breaches,
including cybersecurity incidents.
Business and/or supply chain disruptions, plant downtime and/or power outages and information technology system and/or network
disruptions, regardless of cause including acts of sabotage, employee error or other actions, geo-political activity, weather events and
natural disasters could seriously harm our operations as well as the operations of our customers and suppliers. Failure to effectively
prevent, detect and recover from security breaches, including attacks on information technology and infrastructure by hackers, viruses,
breaches due to employee error or actions or other disruptions could result in misuse of our assets, business disruptions, loss of
property including trade secrets and confidential business information, legal claims or proceedings, reporting errors, processing
inefficiencies, negative media attention, loss of sales and interference with regulatory compliance. Like most major corporations, we
have been and expect to be the target of industrial espionage, including cyber-attacks, from time to time. We have determined that
these attacks have resulted, and could result in the future, in unauthorized parties gaining access to certain confidential business
information, and have included the obtaining of trade secrets and proprietary information related to the chloride manufacturing process
for TiO2 by third parties. Although we do not believe that we have experienced any material losses to date related to these breaches,
there can be no assurance that we will not suffer any such losses in the future. We plan to actively manage the risks within our control
that could lead to business disruptions and security breaches. As these threats continue to evolve, particularly around cybersecurity, we
may be required to expend significant resources to enhance our control environment, processes, practices and other protective
measures. Despite these efforts, such events could materially adversely affect our business, financial condition or results of operations.
If our intellectual property were compromised or copied by competitors, or if our competitors were to develop similar or
superior intellectual property or technology, our results of operations could be negatively affected.
Intellectual property rights, including patents, trade secrets, confidential information, trademarks and tradenames are important to our
business. We endeavor to protect our intellectual property rights in key jurisdictions in which our products are produced or used and in
jurisdictions into which our products are imported. Our success depends to a significant degree upon our ability to protect and preserve
our intellectual property rights. However, we may be unable to obtain protection for our intellectual property in key jurisdictions. Although
we own and have applied for numerous patents and trademarks throughout the world, we may have to rely on judicial enforcement of
our patents and other proprietary rights. Our patents and other intellectual property rights may be challenged, invalidated, circumvented,
and rendered unenforceable or otherwise compromised. A failure to protect, defend or enforce our intellectual property could have an
adverse effect on our financial condition and results of operations. Similarly, third parties may assert claims against us and our
customers and distributors alleging our products infringe upon third party intellectual property rights.
We also rely materially upon unpatented proprietary technology, know-how and other trade secrets to maintain our competitive position.
While we maintain policies to enter into confidentiality agreements with our employees and third parties to protect our proprietary
expertise and other trade secrets, these agreements may not be enforceable or, even if legally enforceable, we may not have adequate
remedies for breaches of such agreements. We also may not be able to readily detect breaches of such agreements. The failure of our
patents or confidentiality agreements to protect our proprietary technology, know-how or trade secrets could result in significantly lower
revenues, reduced profit margins or loss of market share.
If we must take legal action to protect, defend or enforce our intellectual property rights, any suits or proceedings could result in
significant costs and diversion of resources and management’s attention, and we may not prevail in any such suits or proceedings. A
failure to protect, defend or enforce our intellectual property rights could have an adverse effect on our financial condition and results of
operations.
Restrictions under the intellectual property cross-license agreement could limit our ability to develop and commercialize
certain products and/or prosecute, maintain and enforce certain intellectual property.
We depend to a certain extent on DuPont to prosecute, maintain and enforce certain of the intellectual property licensed under the
intellectual property cross-license agreement. Specifically, DuPont is responsible for filing, prosecuting and maintaining patents that
DuPont licenses to us. DuPont also has the first right to enforce such patents, trade secrets and the know-how licensed to us by
DuPont. If DuPont fails to fulfill its obligations or chooses to not enforce the licensed patents, trade secrets or know-how under the
intellectual property cross-license agreement, we may not be able to prevent competitors from making, using and selling competitive
products (unless we are able to effectively exercise our secondary rights to enforce such patents, trade secrets and know-how).
In addition, our
restrictions under
the intellectual property cross-license agreement could limit our ability to develop and
commercialize certain products. For example, the licenses granted to us under the agreement may not extend to all new products,
services and businesses that we may enter in the future. These limitations and restrictions may make it more difficult, time consuming
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The Chemours Company
experience difficulties in their implementation, our business and operating results could be harmed, we could fail to meet our reporting
obligations, and there could be a material adverse effect on our stock price.
Effects of price fluctuations in energy and raw materials, our raw materials contracts and our inability to renew such
contracts, could have a significant impact on our earnings.
Our manufacturing processes consume significant amounts of energy and raw materials, the costs of which are subject to worldwide
supply and demand as well as other factors beyond our control. Variations in the cost of energy, which primarily reflect market prices for
oil and natural gas, and for raw materials may significantly affect our operating results from period to period. Additionally, consolidation
in the industries providing our raw materials may have an impact on the cost and availability of such materials. To the extent we do not
have fixed price contracts with respect to specific raw materials, we have no control over the costs of raw materials and such costs may
fluctuate widely for a variety of reasons, including changes in availability, major capacity additions or reductions, or significant facility
operating problems.
When possible, we have purchased, and we plan to continue to purchase, raw materials, including titanium bearing ores and fluorspar,
through negotiated medium- or long-term contracts to minimize the impact of price fluctuations. To the extent that we have been able to
raw materials at higher prices as compared to other market participants.
We attempt to offset the effects of higher energy and raw material costs through selling price increases, productivity improvements, and
cost reduction programs. However, the outcome of these efforts is largely determined by existing competitive and economic conditions,
and may be subject to a time delay between the increase in our raw materials costs and our ability to increase prices, which could vary
significantly depending on the market served. If we are not able to fully offset the effects of higher energy or raw material costs, it could
have a material adverse effect on our financial results.
Hazards associated with chemical manufacturing, storage and transportation could adversely affect our results of operations.
There are hazards associated with chemical manufacturing and the related storage and transportation of raw materials, products and
wastes. These hazards could lead to an interruption or suspension of operations and have an adverse effect on the productivity and
profitability of a particular manufacturing facility or on us as a whole. While we endeavor to provide adequate protection for the safe
handling of these materials, issues could be created by various events, including natural disasters, severe weather events, acts of
sabotage and performance by third parties, and as a result we could face the following potential hazards:
piping and storage tank leaks and ruptures;
mechanical failure;
employee exposure to hazardous substances; and
•
•
•
•
chemical spills and other discharges or releases of toxic or hazardous substances or gases.
These hazards may cause personal injury and loss of life, damage to property and contamination of the environment, which could lead
to government fines and penalties, work stoppage injunctions, claims and lawsuits by injured persons, damage to our public reputation
and brands, loss of sales and market access, customer dissatisfaction, and diminished product acceptance. If such actions are
determined adversely to us or there is an associated economic impact to our business, we may have inadequate insurance or cash flow
to offset any associated costs. Such outcomes could adversely affect our financial condition and results of operations.
The businesses in which we compete are highly competitive. This competition may adversely affect our results of operations
and operating cash flows.
Each of the businesses in which we operate is highly competitive. Competition in the performance chemicals industry is based on a
number of factors such as price, product quality and service. We face significant competition from major international and regional
competitors. Additionally, our Titanium Technologies business competes with numerous regional producers, including producers in
China, which have expanded their readily available production capacity during the previous five years. Additionally,
the risk of
substitution of Chinese producers by our customers could increase as they expand their use of chloride production technology. Some
competitors have announced plans to expand their chloride capacity.
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Fair Value of Derivative Instruments
The table below presents the fair value of Chemours’ derivative assets and liabilities within the fair value hierarchy, as described in Note
3 to the Consolidated Financial Statements.
achieve favorable pricing in our existing negotiated long-term contracts, we may not be able to renew such contracts at the current
Foreign currency forward contracts
Other accrued liabilities
prices, or at all, and this may adversely impact our cash flow from operations. However, to the extent that the prices of raw materials
that we utilize significantly decline, we may be bound by the terms of our existing long-term contracts and obligated to purchase such
Total liability derivatives
Asset derivatives:
Foreign currency forward contracts
Accounts and notes receivable – trade, net
Balance Sheet Location
Total asset derivatives
Liability derivatives:
Fair Value Using Level 2 Inputs
December 31,
2016
December 31,
2015
$
$
$
$
2 $
2 $
4 $
4 $
2
2
2
2
We classify our foreign currency forward contracts in Level 2 as the valuation inputs are based on quoted prices and market observable
data of similar instruments. For derivative assets and liabilities, standard industry models are used to calculate the fair value of the
various financial instruments based on significant observable market inputs, such as foreign exchange rates and implied volatilities
obtained from various market sources. Market inputs are obtained from well-established and recognized vendors of market data and
subjected to tolerance and quality checks.
Note 22. Long-Term Employee Benefits
Plans Covering Employees in the U.S.
Chemours sponsors a variety of employee benefit plans which cover substantially all U.S. employees. Prior to July 1, 2015, U.S.
employees generally participated in DuPont’s primary pension plan, the Retirement Savings Plan and certain other long-term employee
benefit plans. In conjunction with the separation on July 1, 2015, Chemours employees stopped participating in DuPont plans and
became participants in newly established Chemours plans. DuPont retained all liabilities related to its U.S. plans post-separation.
On July 1, 2015, Chemours established a defined contribution plan, similar in design to the DuPont Retirement Savings plan, which
covered all eligible U.S. employees. The purpose of the Plan is to encourage employees to save for their future retirement needs. The
plan is a tax qualified contributory profit sharing plan, with cash or deferred arrangement, and any eligible employee of Chemours may
participate. Chemours matches 100% of the first 6% of the employee’s contribution election. Chemours may also provide an additional
discretionary retirement savings contribution to eligible employees’ compensation. The amount of this contribution, if any, is at the sole
discretion of the Company. The plan’s matching contributions vest immediately upon contribution. The discretionary contribution vests
for employees with at least three years of service.
In lieu of a defined benefit plan like DuPont’s primary pension plan, Chemours provides an enhanced 401(k) contribution for employees
who previously participated in DuPont’s pension plan. The enhanced benefits consist of an additional contribution of 1% to 7% of the
employee’s eligible compensation depending on the employee’s length of service with DuPont at the time of separation. The plan will
continue for a period up to 2019, subject to early termination.
Plans Covering Employees Outside the U.S.
Pension coverage for employees of Chemours non-U.S. subsidiaries is provided, to the extent deemed appropriate, through separate
plans established after separation and comparable to the DuPont plans in those countries. Obligations under such plans are funded by
depositing funds with trustees, covered by insurance contracts or are unfunded.
Participation in the Plans
Prior to July 1, 2015, Chemours participated in DuPont’s U.S. and non-U.S. plans, except for the plans in the Netherlands and Taiwan,
as though they were participants in a multi-employer plan with the other businesses of DuPont. The following table presents the
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Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
multi-employer pension expense allocated by DuPont to Chemours for the plans in which Chemours participated prior to separation.
The allocation of cost was based on active employee headcount and is included in the Consolidated Statement of Operations. These
amounts do not represent cash payments to DuPont or DuPont’s plans.
Plan Name
EIN / Pension
Number
Year Ended December 31,
2016
2015
2014
DuPont Pension and Retirement Plan (U.S.) . . . . . . . . . . . . . . . . . . . .
All other U.S. and non-U.S. Plans . . . . . . . . . . . . . . . . . . . . . . . . . . .
51-0014090/001
$
— $
—
$
48
5
51
(1)
Single and Multiple Employer Plans
Beginning in the first quarter of 2015, Chemours has accounted for the plans covering its employees in the Netherlands and Taiwan as
a multiple employer plan and a single employer plan, respectively. In the third quarter of 2015, in connection with the separation,
additional plans in Germany, Belgium, Japan, Korea, Mexico and Switzerland were established. As of December 31, 2015, these plans
were all accounted for as single employer plans.
The net periodic benefit costs for the pension and amounts recognized in other comprehensive income for the years ended
December 31, 2016, 2015 and 2014 were as follows:
Year Ended December 31,
2016
2015
2014
Net periodic pension cost (income):
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service (credit) cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailment gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
14
19
(63)
23
(1)
(2)
5
Net periodic pension income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(5)
$
Changes in plan assets and benefit obligations recognized in other comprehensive loss
(income):
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service credit (cost) and curtailment gain . . . . . . . . . . . . . . . .
Effect of foreign exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total benefit recognized in other comprehensive income . . . . . . . . . . . . . . . . . . .
Total recognized in net periodic pension income and other comprehensive income . .
$
$
$
17
(28)
—
3
(15)
(23)
(28)
$
$
$
16
19
(83)
16
4
—
—
(28)
11
(16)
(24)
(4)
(33)
(66)
(94)
$
$
$
$
$
The pre-tax amounts recognized in accumulated other comprehensive loss are summarized below:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service credit
Total amount recognized in accumulated other comprehensive loss . . . . . . . . . . . . .
$
$
336
(11)
325
$
$
363
(16)
347
$
$
Year Ended December 31,
2016
2015
2014
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
The estimated pre-tax net loss and prior service credit for the defined benefit pension plans that will be amortized from accumulated
other comprehensive income (loss) into net periodic benefit cost during 2017 are $16 and $2, respectively.
The Chemours Company
also may be subject to changes in our operations and production based on increased regulation or other changes to, or restrictions
imposed by, any such additional regulations. In addition, the manner in which adopted regulations (including environmental regulations)
are ultimately implemented may affect our products, the demand for and public perception of our products, the reputation of our brands,
our market access and our results of operations. In the event of a catastrophic incident involving any of the raw materials we use or
chemicals we produce, we could incur material costs as a result of addressing the consequences of such event and future reputational
costs associated with any such event.
As a result of our operations, including the operations of divested businesses and certain discontinued operations, we could incur
substantial costs, including remediation and restoration costs. The costs of complying with complex environmental laws and regulations,
as well as internal voluntary programs, are significant and will continue to be significant for the foreseeable future. This includes costs
we expect to continue to incur for environmental investigation and remediation activities at a number of our current or former sites and
third-party disposal
locations. However, the ultimate costs under environmental
laws and the timing of
these costs are difficult to
accurately predict. While we establish accruals in accordance with generally accepted accounting principles, the ultimate actual costs
and liabilities may vary from the accruals because the estimates on which the accruals are based depend on a number of factors (many
of which are outside of our control), including the nature of the matter and any associated third-party claims, the complexity of the site,
site geology, the nature and extent of contamination, the type of remedy, the outcome of discussions with regulatory agencies and other
Potentially Responsible Parties (PRPs) at multi-party sites and the number and financial viability of other PRPs. See “Environmental
Matters” within Item 7 — Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations for further
information and Note 20 to the Consolidated Financial Statements included elsewhere in this Annual Report.
There is also a risk that one or more of our key raw materials or one or more of our products may be found to have, or be characterized
as having, a toxicological or health-related impact on the environment or on our customers or employees or unregulated emissions,
which could potentially result in us incurring liability in connection with such characterization and the associated effects of any
toxicological or health-related impact. If such a discovery or characterization occurs, we may incur increased costs in order to comply
with new regulatory requirements or the relevant materials or products, including products of our customers incorporating our materials
or products, may be recalled or banned. Changes in laws, science or regulations, or their interpretation, and our customers’ perception
of such changes or interpretations may also affect the marketability of certain of our products.
The markets for many of our products have seasonally affected sales patterns.
The demand for TiO2, certain of our fluoroproducts and certain of our other products during a given year is subject to seasonal
fluctuations. As a result of seasonal fluctuations, our operating cash flow may be negatively impacted due to demand fluctuations. In
particular, because TiO2 is widely used in coatings, demand is higher in the painting seasons of spring and summer. Because certain
fluoroproducts are used in refrigerants, such products are in higher demand in the spring and summer in the Northern Hemisphere. We
may be adversely affected by anticipated or unanticipated changes in regional weather conditions. For example, poor weather
conditions in a region can lead to an abbreviated painting season, which can depress consumer sales of paint products that use TiO2,
which could have a negative effect on our cash position.
Failure to maintain effective internal controls could adversely affect our ability to meet our reporting requirements.
The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires, among other things, that we maintain effective internal control
over financial reporting and disclosure controls and procedures. One key aspect of the Sarbanes-Oxley Act is that we must perform
system and process evaluation and testing of our internal control over financial reporting to allow management and our independent
registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section
404 of the Sarbanes-Oxley Act, with auditor attestation of the effectiveness of our internal controls. If we are not able to comply with
the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in
our internal control over financial reporting that are deemed to be material weaknesses, the market price of our common shares could
decline and we could be subject to penalties or investigations by the NYSE, the SEC or other regulatory authorities, which would require
additional financial and management resources.
Effective internal controls are necessary for us to provide reasonable assurance with respect to our financial reports, and to effectively
prevent fraud. Internal controls over financial reporting may not prevent or detect misstatements because of
inherent limitations,
including the possibility of human error,
the circumvention or overriding of controls, or fraud. Therefore, even effective internal
controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. If we
cannot provide reasonable assurance with respect to our financial reports and effectively prevent fraud, our operating results could be
harmed. In addition, if we fail to maintain the effectiveness of our internal controls, including any failure to implement required new
or improved controls, or if we experience delay in the implementation of new or enhanced system, procedures and controls, or if we
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Summarized information on the Company’s pension benefit plans is as follows:
2016
2015
Change in benefit obligation
Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumption and establishment of pension plans . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost
Interest cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements & transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in plan assets
Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumption and establishment of pension plans . . . . . . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements & transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Funded status at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
1,103
—
14
19
2
69
(36)
—
(3)
(12)
(2)
(49)
1,105
1,137
—
113
16
2
(36)
(12)
(51)
1,169
64
The net amounts recognized in the Consolidated Balance Sheet as of December 31, 2016 and 2015 consist of:
Noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
$
159
(1)
(94)
$
$
$
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
64
$
—
1,332
16
19
2
(76)
(39)
(24)
—
(6)
—
(121)
1,103
—
1,297
(7)
16
2
(39)
(6)
(126)
1,137
34
2015
138
(2)
(102)
34
Our operations and production facilities are subject to extensive environmental and health and safety laws and regulations at national,
The accumulated benefit obligation for all pension plans was $1,042 and $1,030 as of December 31, 2016 and 2015, respectively.
The following information relates to pension plans with projected and accumulated benefit obligations in excess of the fair value of plan
assets at December 31, 2016 and 2015:
Pension plans with projected benefit obligation in excess of plan assets at December 31,
2016
2015
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
183
152
87
194
158
93
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The Chemours Company
through DuPont, are pursuing appeals of the cases that resulted in a jury verdict, there can be no assurance that any such appeal
succeeds. On February 11, 2017, DuPont entered into an agreement in principle with plaintiffs’ counsel representing the MDL plaintiffs
providing for a global settlement of all cases and claims in the MDL, including all filed and unfiled personal injury cases and claims that
are part of the plaintiffs’ counsel’s claim inventory, as well as cases that have been tried to a jury verdict (the “MDL Settlement”). The
total settlement amount is $670.7 million dollars in cash, half of which will be paid by Chemours and half paid by DuPont. DuPont’s
payment would not be subject to indemnification or reimbursement by Chemours, and Chemours has accrued $335 million associated
with this matter at December 31, 2016. In exchange for payment of the total settlement amount, DuPont and Chemours will receive a
complete release of all claims by the settling plaintiffs. The MDL Settlement was entered into solely by way of compromise and
settlement and is not in any way an admission of liability or fault by DuPont or Chemours. The MDL Settlement is not subject to court
approval; however, the MDL Settlement may not proceed in certain conditions, including a walk-away right that enables DuPont to
terminate the MDL Settlement if more than a specified number of plaintiffs determine not to participate. If the MDL Settlement does not
proceed, any cases stayed or additional lawsuits may go to trial or appeal. An adverse ruling at trial or on appeal could result in us
incurring additional costs and liabilities. There could also be new lawsuits filed related to DuPont’s use of PFOA, its manufacture of
PFOA, or its customers use of DuPont products that may not be within the scope of the MDL Settlement. Any such new litigation could
also result in us incurring additional costs and liabilities, which may be material to our financial results. If such litigation described above
were to occur and if significant unfavorable outcomes in a number of cases were to result, losses, if incurred, in excess of amounts
accrued at December 31, 2016 could, in the aggregate, have a material adverse effect on us.
In the ordinary course of business, we may make certain commitments, including representations, warranties and indemnities relating
to current and past operations, including those related to divested businesses, and issue guarantees of
third party obligations.
Additionally, we are required to indemnify DuPont with regard to liabilities allocated to, or assumed by us under each of the separation
agreement, the employee matters agreement, the tax matters agreement and the intellectual property cross-license agreement that
were executed prior to the spin-off. These indemnification obligations to date have included defense costs associated with certain
litigation matters as well as certain damages awards, settlements, and penalties. In connection with MDL Settlement mentioned above,
DuPont and Chemours agreed, subject to and following the completion of the MDL Settlement, to a limited sharing of potential future
PFOA liabilities (i.e., “indemnifiable losses,” as defined in the separation agreement between DuPont and Chemours) for a period of five
years. During that five-year period, Chemours would annually pay future PFOA liabilities up to $25 million and, if such amount is
exceeded, DuPont would pay any excess amount up to the next $25 million (which payment will not be subject to indemnification by
Chemours), with Chemours annually bearing any further excess liabilities under the terms of
the separation agreement. After the
five-year period,
this limited sharing agreement would expire, and Chemours’
indemnification obligations under the separation
agreement would continue unchanged. Chemours has also agreed that, upon the MDL Settlement becoming effective, it will not contest
its liability to DuPont under the separation agreement for PFOA liabilities on the basis of ostensible defenses generally applicable to the
indemnification provisions under the separation agreement, including defenses relating to punitive damages, fines or penalties or
attorneys’ fees, and waives any such defenses with respect to PFOA liabilities. Chemours has, however, retained defenses as to
whether any particular PFOA claim is within the scope of
the indemnification provisions of
the separation agreement. As we are
required to make payments, such payments could be significant and could exceed the amounts we have accrued with respect thereto,
adversely affecting our results of operations. In addition, in the event that DuPont seeks indemnification for adverse trial rulings or
outcomes, these indemnification claims could materially adversely affect our financial condition. Disputes between Chemours and
DuPont many also arise with respect to indemnification matters including disputes based on matters of law or contract interpretation. If
and to the extent these disputes arise, they could materially adversely affect us.
For further information about the Company’s litigation and other commitments and contingencies, see Item 3. Legal Proceedings and
our Note 20 to the Consolidated Financial Statements included elsewhere in this Annual Report.
We are subject to extensive environmental, health and safety laws and regulations that may result in unanticipated loss or
liability related to our current and past operations, which could reduce our profitability.
international and local
levels in numerous jurisdictions relating to pollution, protection of
the environment, climate change,
transporting and storing raw materials and finished products and storing and disposing of hazardous wastes. Such laws include, in the
U.S., the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, often referred to as Superfund), the
Resource Conservation and Recovery Act (RCRA) and similar state and global laws for management and remediation of hazardous
materials, the Clean Air Act (CAA) and the Clean Water Act, for protection of air and water resources, the Toxic Substances Control
Act (TSCA), and in the EU, the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), for regulation of
chemicals in commerce and reporting of potential known adverse effects and numerous local, state, federal and foreign laws and
regulations governing materials transport and packaging. If we are found to be in violation of these laws or regulations, which may be
subject to change based on legislative, scientific or other factors, we may incur substantial costs, including fines, damages, criminal or
civil sanctions, remediation costs, reputational harm, loss of sales or market access, or experience interruptions in our operations. We
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Pension plans with accumulated benefit obligation in excess of plan assets at December 31,
2016
2015
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
179
151
84
190
157
90
Assumptions
The Company generally utilizes discount rates that are developed by matching the expected cash flows of each benefit plan to various
yield curves constructed from a portfolio of high quality, fixed income instruments provided by the plan’s actuary as of the measurement
date. The expected rate of return on assets reflects economic assumptions applicable to each country.
competitiveness.
The following assumptions have been used to determine the benefit obligations and net benefit cost:
Weighted average assumptions used to determine benefit obligations at December 31,
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
1.8%
2.5%
2015
2.4%
2.6%
(1) The rate of compensation increase represents the single annual effective salary increase that an average plan participant would
receive during the participant’s entire career at Chemours.
Weighted average assumptions used to determine net benefit cost for the years ended
December 31,
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
2.4%
2.5%
5.7%
2015
1.7%
3.9%
7.2%
Plan Assets
Each pension plan’s assets are invested through a master trust fund. The strategic asset allocation for the trust fund is selected by
management, reflecting the results of comprehensive asset and liability modeling. Chemours establishes strategic asset allocation
percentage targets and appropriate benchmarks for significant asset classes with the aim of achieving a prudent balance between
return and risk. Strategic asset allocations in countries are selected in accordance with the laws and practices of those countries.
adversely affected.
The weighted average target allocation for Chemours’ pension plan assets is summarized as follows:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. and non-U.S. equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
2015
2.5%
41.6%
55.9%
2.7%
42.3%
55.0%
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100.0%
100.0%
Fixed income securities include corporate issued, government
encompass a range of credit risk and industry diversification.
issued and asset backed securities. Corporate debt
investments
Fair value calculations may not be indicative of net realizable value or reflective of future fair values. Furthermore, although Chemours
believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or
assumptions to determine the fair value of certain financial
instruments could result in a different fair value measurement at the
reporting date.
The Chemours Company
Market conditions, as well as global and regional economic downturns that adversely affect the demand for the end-use
products that contain TiO2, fluoroproducts or our other products, could adversely affect the profitability of our operations and
the prices at which we can sell our products, negatively impacting our financial results.
Our revenue and profitability is largely dependent on the TiO2 industry and the industries that are end users of our fluoroproducts. TiO2
and our fluoroproducts, such as refrigerants and resins, are used in many “quality of life” products for which demand historically has
been linked to global, regional and local GDP and discretionary spending, which can be negatively impacted by regional and world
events or economic conditions. Such events are likely to cause a decrease in demand for our products and, as a result, may have an
adverse effect on our results of operations and financial condition. The future profitability of our operations, and cash flows generated
by those operations, will also be affected by the available supply of our products in the market.
Our reported results could be adversely affected by currency exchange rates and currency devaluation could impair our
Due to our international operations, we transact in many foreign currencies, including but not limited to the Euro, Brazilian real, Mexican
peso and Japanese yen. As a result, we are subject to the effects of changes in foreign currency exchange rates. During times of a
strengthening U.S. dollar, our reported net revenues and operating income will be reduced because the local currency will be translated
into fewer U.S. dollars. During periods of local economic crisis, local currencies may be devalued significantly against the U.S. dollar,
potentially reducing our margin. For example, unfavorable movement in the Euro has negatively impacted our results of operations since
the second half of 2014, and further decline of
the Euro could affect future periods. Currently, Chemours does not hedge on a
transactional basis. There can be no assurance that any hedging action in the future will lessen the adverse impact of a variation in
currency rates. Also, actions to recover margins may result in lower volume and a weaker competitive position, which may have an
adverse effect on our profitability. For example, in Titanium Technologies, a substantial portion of our manufacturing is located in the
U.S. and Mexico, while our TiO2 is delivered to customers around the world. Furthermore, our ore cost is principally denominated in U.S.
dollars. Accordingly, in periods when the U.S. dollar or Mexican Peso strengthen against other local currencies such as the Euro, our
costs are higher relative to our competitors who operate largely outside of the United States, and the benefits we realize from having
lower costs associated with our manufacturing process are reduced, impacting our profitability.
If we are unable to execute our cost reduction plans successfully, our total operating costs may be greater than expected,
which may adversely affect our profitability.
We have announced a transformation plan that includes a number of cost saving measures. We have implemented a number of these
measures and have realized a portion of the anticipated benefits. While we continue to search for opportunities to reduce our costs and
expenses to improve operating profitability without jeopardizing the quality of our products or the effectiveness of our operations, our
success in achieving targeted cost and expense reductions depends upon a number of factors such as timing of execution, market
condition, and regulatory and local requirements and approvals. If we do not successfully execute on our cost reduction initiatives or if
we experience delays in completing the implementation of these initiatives, our results of operations or financial condition could be
Our results of operations could be adversely affected by litigation and other commitments and contingencies.
We face risks arising from various unasserted and asserted legal claims, investigation and litigation matters, such as product liability,
patent
infringement, antitrust claims, and claims for
third party property damage or personal
injury stemming from alleged
environmental actions (which may concern regulated or unregulated substances) or other torts,
including, as discussed below,
litigation related to the production and use of PFOA (collectively, perfluorooctanoic acids and its salts, including the ammonium salt)
by DuPont prior to the separation. We have noted a nationwide trend in purported class actions against chemical manufacturers
generally seeking relief such as medical monitoring, property damages, off-site remediation and punitive damages arising from alleged
environmental actions (which may concern regulated or unregulated substances) or other torts without claiming present personal
injuries. We also have noted a trend in public and private nuisance suits being filed on behalf of states, counties, cities and utilities
alleging harm to the general public. Various factors or developments can lead to changes in current estimates of liabilities such as a
final adverse judgment, significant settlement or changes in applicable law. A future adverse ruling or unfavorable development could
result in future charges that could have a material adverse effect on us. An adverse outcome in any one or more of these matters could
be material to our financial results and could adversely impact the value of any of our brands that are associated with any such matters.
As discussed in more detail in Note 20 to the Consolidated Financial Statements, DuPont is the named defendant in approximately
3,500 lawsuits alleging that the respective plaintiffs were exposed to PFOA in drinking water as a result of DuPont’s use of PFOA at
the Washington Works plant
in Parkersburg, West Virginia. These personal
injury lawsuits were consolidated in multi-district
litigation in the United States District Court for the Southern District of Ohio (the “MDL”). As of December 31, 2016, three cases
have gone to trial and resulted in a jury verdict in favor of
the plaintiff, and several other cases have been settled. Although we,
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financial performance.
Environmental Matters
Available Information
Information related to environmental matters is included in several areas of this report: (1) Item 1A — Risk Factors, (2) Item 3 — Legal
Proceedings — Environmental Proceedings, (3) Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of
Operations, and (4) Notes 3 and 20 to the Consolidated Financial Statements.
to file reports and information with the Securities and Exchange Commission (SEC), including reports on the following forms: annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934.
The public may read and copy any materials the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE,
Washington, DC 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC also maintains an Internet site at http://www.sec.gov that contains reports, proxy and information
statements, and other information regarding issuers that file electronically with the SEC.
The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those
reports are also accessible on the Company’s website at http://www.chemours.com by clicking on the section labeled “Investor
Relations”, then on “Filings & Reports” and then on “SEC Filings”. These reports are made available, without charge, as soon as is
reasonably practicable after the Company files or furnishes them electronically with the SEC.
Employees
our locations in recent history.
Item 1A. RISK FACTORS
Risks Related to Our Business
condition, and cash flows.
The company’s operations could be affected by various risks, many of which are beyond our control. Based on current information, we
believe that the following identifies the most significant risk factors that could affect our business, results of operations or financial
condition. Past financial performance may not be a reliable indicator of future performance and historical trends should not be used to
anticipate results or trends in future periods. See “Cautionary Statement Concerning Forward-Looking Statements” for more details.
Conditions in the global economy and global capital markets may adversely affect our results of operations, financial
Our business and operating results may in the future be adversely affected by global economic conditions, including instability in credit
markets, declining consumer and business confidence, fluctuating commodity prices and interest rates, volatile exchange rates, and
other challenges such as the changing financial regulatory environment that could affect the global economy. Our customers may
experience deterioration of their businesses, cash flow shortages, and difficulty obtaining financing. As a result, existing or potential
customers may delay or cancel plans to purchase products and may not be able to fulfill their obligations to us in a timely fashion.
Further, suppliers could experience similar conditions, which could impact their ability to supply materials or otherwise fulfill their
obligations to us. Because we have significant international operations, there are a large number of currency transactions that result
from international sales, purchases, investments and borrowings. Also, our effective tax rate may fluctuate because of variability in
geographic mix of earnings, changes in statutory rates, and taxes associated with repatriation of non-U.S. earnings. Future weakness
in the global economy and failure to manage these risks could adversely affect our results of operations, financial condition and cash
flows in future periods.
overall business and should not be considered a reliable indicator of the Company’s ability to achieve any particular level of revenue or
The Chemours Company
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
The table below presents the fair values of Chemours’ pension assets by level within the fair value hierarchy, as described in Note 3, as
of December 31, 2016 and 2015.
2
2
Chemours is subject to the reporting requirements under the Securities Exchange Act of 1934. Consequently, the Company is required
Debt – asset backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset Category:
Debt – government issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Debt – corporate issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. and non U.S. equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives – asset position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives – liability position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair Value Measurements at December 31, 2016
Total
Level 1
Level 2
$
433
142
42
502
3
(32)
77
7
$
8
76
25
28
—
—
77
—
1,174
$
214
$
425
66
17
474
3
(32)
—
7
960
We have approximately 7,000 employees, approximately 21% of whom are represented by unions or works councils. Management
believes that its relations with its employees and labor organizations are good. There have been no strikes or work stoppages in any of
Asset Category:
Fair Value Measurements at December 31, 2015
Total
Level 1
Level 2
Pension trust payables, net(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,169
(1) Payables are primarily for investment securities purchased.
Debt – government issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Debt – corporate issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt – asset backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. and non U.S. equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives – asset position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives – liability position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
465
148
33
460
4
(16)
40
6
$
7
60
—
37
—
—
40
4
1,140
$
148
$
Pension trust payables, net(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,137
458
88
33
423
4
(16)
—
2
992
(1) Payables are primarily for investment securities purchased.
For pension plan assets classified as Level 1, total fair value is either the price of the most recent trade at the time of the market close
or the official close price, as defined by the exchange on which the asset is most actively traded on the last trading day of the period,
multiplied by the number of units held without consideration of transaction costs.
For pension benefit plan assets classified as Level 2, where the security is frequently traded in less active markets, fair value is based
on the closing price at the end of the period; where the security is less frequently traded, fair value is based on the price a dealer would
pay for the security or similar securities, adjusted for any terms specific to that asset or liability. Market inputs are obtained from
well-established and recognized vendors of market data and subjected to tolerance and quality checks. For derivative assets and
liabilities, standard industry models are used to calculate the fair value of
instruments based on significant
observable market inputs, such as foreign exchange rates, commodity prices, swap rates, interest rates and implied volatilities obtained
from various market sources.
the various financial
14
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Defined Benefit Plan
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
DuPont contributed, on behalf of Chemours, $35 to its pension plans other than the principal U.S. pension plan in 2014. DuPont
contributed, on behalf of Chemours, $66 to its other long-term employee benefit plans in 2014. DuPont contributed, on behalf of
Chemours, $38 in the first half of 2015 to its pension and other long-term benefit plans and Chemours contributed $8 during 2015 to its
pension plans. Chemours contributed $16 during 2016. Chemours expects to contribute $15 to its pension plans in 2017.
Estimated future benefit payments
The following benefit payments are expected to be paid over the next five years and the five years thereafter as of December 31, 2016:
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52
40
42
43
43
2022 – 2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
232
Teflon™, Viton™, Nafion™ and Krytox™ trademarks to be valuable assets.
Defined Contribution Plan
DuPont’s contributions to the plan on behalf of Chemours were allocated in the amounts of $52 for the year ended December 31, 2014.
In addition, DuPont contributed on behalf of Chemours about $26 to its defined contribution plans for the first half of 2015. From July 1
to December 31, 2015, Chemours contributed $28 to its defined contribution plan. For the year ended December 31, 2016, Chemours
contributed $44 to its defined contribution plan.
Note 23. Stock-based Compensation
Total stock-based compensation cost included in the Consolidated Statements of Operations was $20, $17 and $7 for the years ended
December 31, 2016, 2015 and 2014, respectively. The income tax benefits related to stock-based compensation arrangements were $8,
$7 and $3 for the years ended December 31, 2016, 2015 and 2014, respectively.
Stock-based compensation expense in prior years and until separation on July 1, 2015 was allocated to Chemours based on the portion
of DuPont’s incentive stock program in which Chemours employees participated. Adopted at separation, the Chemours Company
Equity and Incentive Plan grants certain employees, independent contractors, or non-employee directors of
the Company different
forms of awards, including stock options, restricted share units (RSUs) and performance share units (PSUs). The equity and incentive
plan has maximum shares reserve of 13,500,000 for the grant of equity awards plus the number of shares of converted awards
(described below). As of December 31, 2016, 7,806,040 shares of equity and incentive plan reserve are still available for grants.
Chemours Compensation Committee determines the long-term incentive mix, including stock options PSU and RSU, and may authorize
new grants annually.
In accordance with the employee matters agreement between DuPont and Chemours, certain executives and employees were entitled
to receive equity compensation awards of Chemours in replacement of previously outstanding awards granted under various DuPont
stock incentive plans prior to the separation. In connection with the spin-off, these awards were converted into new Chemours equity
awards using a formula designed to preserve the intrinsic value of the awards immediately prior to the July 1, 2015 spin-off. At the date
of conversion, total intrinsic value of the converted options was $18. As a result of the conversion of these awards, we recorded an
approximate $3 incremental charge in the third quarter of 2015. The terms and conditions of the DuPont awards were replicated and as
necessary, adjusted to ensure that the vesting schedule and economic value of the awards was unchanged by the conversion. Subject
to vesting condition of the award, a retirement eligible employee retains any granted awards upon retirement provided the employee has
rendered at least six months of service following the grant date.
The Chemours Company
our Fluoroproducts segment, as described herein. These patents, including various patents that will expire from 2017 through 2034, in
the aggregate, are believed to be of material importance to our business. However, we believe that no single patent (or related group of
patents) is material in relation to our business as a whole. In addition, particularly in our Titanium Technologies segment, we hold
significant intellectual property in the form of trade secrets and, while we believe that no single trade secret is material in relation to our
combined business as a whole, we believe they are material
in the aggregate. Unlike patents,
trade secrets do not have a
predetermined validity period, but are valid indefinitely, so long as their secrecy is maintained. We work actively on a global basis to
create, protect and enforce our intellectual property rights. The protection afforded by these patents and trademarks varies based on
country, scope of individual patent and trademark coverage, as well as the availability of legal remedies in each country. Although
certain proprietary intellectual property rights are important to the success of our company, we do not believe that we are materially
dependent on any particular patent or trademark. We believe that securing our intellectual property is critical to maintaining our
technology leadership and our competitive position, especially with respect
to new technologies or the extensions of existing
technologies. Our proprietary process technology is also a source of incremental income through licensing arrangements.
Our Titanium Technologies segment in particular relies upon unpatented proprietary knowledge and continuing technological innovation
and other trade secrets to develop and maintain our competitive position in this space. Our proprietary chloride production process is an
important part of our technology and our business could be harmed if our trade secrets are not maintained in confidence. In our
Titanium Technologies intellectual property portfolio, we consider our trademark Ti-Pure™ to be a valuable asset and have registered
this trademark in a number of countries.
Our Fluoroproducts segment is the technology leader in the markets in which it participates. We have one of
the largest patent
portfolios in the fluorine derivatives industry. In our Fluoroproducts intellectual property portfolio, we consider our Freon™, Opteon™,
Our Chemical Solutions segment is a manufacturing and application development technology leader in a majority of the markets in
which it participates. Trade secrets are one of the key elements of our intellectual property security in Chemical Solutions as most of
the segment’s manufacturing and application development technologies are no longer under patent coverage.
At separation, certain of our subsidiaries entered into an intellectual property cross-license agreement with DuPont, pursuant to which
(i) DuPont has agreed to license to Chemours certain patents, know-how and technical information owned by DuPont or its affiliates
and necessary or useful
in Chemours’ business, and (ii) Chemours has agreed to license to DuPont certain patents owned by
Chemours or its affiliates and necessary or useful in DuPont’s business. In most circumstances, the licenses are perpetual, irrevocable,
sublicenseable (in connection with the party’s business), assignable (in connection with a sale of the applicable portion of a party’s
business or assets, subject to certain exceptions) worldwide licenses in connection with the current operation of the businesses and,
with respect to specified products and fields of use, future operation of such businesses, subject to certain limitations with respect to
specified products and fields of use.
Research and Development
We perform research and development activities in all of our segments with the majority of our efforts focused in the Fluoroproducts
segment. The Fluoroproducts segment efforts center on developing new sustainable fluorochemicals as well as determining new
applications and formulations for fluoropolymers that meet customers’ technical requirements. In Titanium Technologies and Chemical
Solutions, our efforts are focused on process technology to reduce cost and maintain safety and stewardship standards. The table
below sets forth the last three years of research and development expense by segment:
(Dollars in millions)
Titanium Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Fluoroproducts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chemical Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
27
46
7
80
$
$
33
50
14
97
$
$
47
79
17
143
Year Ended December 31,
2016
2015
2014
Backlog
In general, the Company does not manufacture its products against a backlog of orders and does not consider backlog to be a
significant indicator of the level of future sales activity. Production and inventory levels are based on the level of incoming orders as
well as projections of future demand. Therefore, the Company believes that backlog information is not material to understanding its
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sodium cyanide, methylamines and Vazo™. Our competitive cost positions in these products are the result of our process technology,
manufacturing scale, efficient supply chain and proximity to large customers. Our Chemical Solutions segment also holds, and
occasionally licenses, what we believe to be a leading process technologies for the production of hydrogen and sodium cyanide, which
Stock Options
The Chemours Company
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Chemours granted non-qualified options to employees in July 2015 representing replacement of previously granted performance stock
unit awards at DuPont. The July 2015 grant will cliff vest March 1, 2018 and expire 10 years from date of grant. Other than those
options, Chemours’ expense related to stock options was entirely related to options granted to replace outstanding option awards from
DuPont that were converted to Chemours options on July 1, 2015. During 2016, Chemours granted non-qualified options to certain of
its employees, which will serially vest over a three-year period and expire 10 years from the date of grant.
The fair value related to stock options granted was determined using Black-Scholes option pricing model and the weighted average
assumptions are shown in the table below:
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected term (years)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2016
1.46%
6.00
60.00%
2.14%
2015
1.50%
5.40
42.00%
6.90%
disruptions and potential price increases. To further mitigate the risk of raw material availability and cost fluctuation, Chemical Solutions
Fair value per stock option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3.41
$ 3.17
Sales may take place through either spot transactions or via long-term contracts.
The following table summarizes Chemours stock option activity for the year ended December 31, 2016.
The Company determined the dividend yield by dividing the expected annual dividend on the Company’s stock by the option exercise
price. A historical daily measurement of volatility is determined based on Chemours peer companies’ average volatility adjusted for the
Company’s debt leverage. The risk-free interest rate is determined by reference to the yield on an outstanding U.S. Treasury note with a
term equal to the expected life of the option granted. The expected term is determined using a simplified approach, calculated as the
midpoint between the vesting period and the contractual life of the award. After the separation, the simplified approach was used due to
the Company’s lack of historical experience upon which to estimate the expected lives of the options.
Weighted
Average
Exercise
Price
(per share)
Weighted
Average
Remaining
Contractual
Term
(years)
Number of
Shares
(in thousands)
Aggregate
Intrinsic Value
(in thousands)
Outstanding, December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . .
8,284
$
14.66
4.82
$
—
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding, December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . .
Exercisable, December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . .
1,435
(947)
(447)
(356)
7,969
3,912
$
$
5.73
12.17
15.53
5.82
13.72
14.04
5.08
3.25
$
$
66,668
31,487
The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value (the difference between the Company’s
closing stock price on the last trading day of December 31, 2015 and the exercise price, multiplied by the number of in-the-money
options) that would have been received by the option holders had all option holders exercised their in-the-money options at quarter end.
The amount changes based on the fair market value of the Company’s stock. Total intrinsic value of options exercised for year ended
December 31, 2015 was insignificant.
As of December 31, 2016, there was $3,762 of unrecognized stock-based compensation expense related to stock options that is
expected to be recognized over a weighted average period of 1.64 years.
are used in industrial polymers and in gold production.
Chemours has global leadership positions in the following product categories:
Product (Product Group)
Position
Key Applications
Mining Solutions(1)
#1 in Solid Sodium Cyanide
Gold Production
Key Competitors
Orica, Cyanco
in the Americas
Chemical Solutions Leadership Positions
(1) Previously known as Cyanides business product group, which was renamed to Mining Solutions for the year ended December 31,
2016.
Raw Materials
material to our business.
Sales, Marketing and Distribution
Key raw materials for Chemical Solutions include ammonia, methanol, natural gas, hydrogen and caustic soda. We source raw
materials from global and regional suppliers where possible and maintain multiple supplier relationships to protect against supply
has also taken steps to optimize routes for distribution, lock in long-term contracts with key suppliers and increase the number of
customer contracts with raw material price pass-through terms. We do not believe that the loss of any particular supplier would be
Our technical, marketing and sales teams around the world have deep expertise with our products and their end markets. We
predominantly sell directly to end-customers, although we also use a network of distributors for specific product lines and geographies.
Most of Chemical Solutions’ raw materials and products can be delivered by efficient bulk transportation. As such, we maintain a large
fleet of railcars, tank trucks and containers to support our supply chain needs. For the portion of the fleet that is leased, related lease
terms are usually staggered, which provides us with a competitive cost position as well as the ability to adjust the size of our container
fleet in response to changes in market conditions. A dedicated logistics team, along with external partners, continually optimizes the
assignment of our transportation equipment to product lines and geographic regions in order to maximize utilization and flexibility of the
The strategic placement of our production facilities in locations designed to serve our key customer base in the Americas gives us
supply chain.
Customers
robust distribution capabilities.
Our Chemical Solutions segment focuses on developing long-term partnerships with key market participants. Many of our commercial
and industrial relationships have been in place for decades and are based on our proven value proposition of safely and reliably
supplying our customers with the materials needed for their operations. Our reputation and long-term track record is a key competitive
advantage as several of the products’ end users demand the highest level of excellence in safe manufacturing, distribution, handling
and storage. Chemical Solutions has U.S. Department of Transportation Special Permits and Approvals in place for distribution of
various materials associated with each of our business lines as required. Our Chemical Solutions segment serves over 400 customers
globally. No single Chemical Solutions customer represented more than ten percent of the segment’s sales in 2016.
Our Chemical Solutions segment sales are subject to minimal seasonality.
Seasonality
Intellectual Property
Intellectual property, including trade secrets, certain patents, trademarks, copyrights, know-how and other proprietary rights, is a
Restricted Share Units
critical part of maintaining our technology leadership and competitive edge. Our business strategy is to file patent and trademark
applications globally for proprietary new product and application development technologies. We hold many patents, particularly in
At the time of separation, in accordance with the employee matters agreement, the Company issued RSUs that serially vest over a
three-year period and, upon vesting, convert one-for-one to Chemours common stock to replace similar DuPont awards. Under the
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
existing awards, a retirement eligible employee retains any granted awards upon retirement provided the employee has rendered at
least six months of service following the grant date. Additional RSUs were also granted to key senior management employees with a
performance condition. These RSUs vest on the third anniversary of the date of grant subject to the satisfaction of the performance
condition. The fair value of all stock-settled RSUs is based upon the market price of the underlying common stock as of the grant date.
Non-vested awards of RSUs, both with and without performance feature, as of December 31, 2016 are shown below. The weighted
average grant date fair value of RSUs granted and converted during 2016 was $6.20.
Number of
Shares
(in thousands)
Weighted Average
Grant Date Fair
Value
(per share)
Nonvested, December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,349
$
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,003
(829)
(207)
Nonvested, December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,316
$
14.87
6.20
14.74
15.09
11.23
As of December 31, 2016, there was $12,128 of unrecognized stock-based compensation expense related to RSUs that is expected to
be recognized over a weighted average period of 1.54 years.
Performance Share Units
During 2016, Chemours issued PSUs to key senior management employees which, vest and convert one-for-one to Chemours’
common stock to the extent specified performance goals, including certain market-based conditions, are met over the three year
performance period specified in the grant, subject to exceptions. Each grantee is granted a target award of PSUs, and may earn
between 0% and 200% of the target amount depending on the Company’s performance against the performance goals. During the year
ended December 31, 2016, the Company recorded stock-based compensation related to PSUs as a component of selling, general and
administrative expense of approximately $2. There were no PSUs granted prior to 2016.
The following table provides compensation costs for stock-based compensation related to PSUs:
Number of
Shares
(in thousands)
Weighted Average
Grant Date Fair
Value
(per share)
Nonvested, December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
825
—
(22)
Nonvested, December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
803
$
—
6.10
—
6.10
6.10
A portion of the fair value of PSUs was estimated at the grant date based on the probability of satisfying the market-based conditions
associated with the PSUs using the Monte Carlo valuation method, which assesses probabilities of various outcomes of market
conditions. The other portion of the fair value of the PSUs is based on the fair market value of the Company’s stock at the grant date,
regardless of whether the market-based condition is satisfied. The per unit weighted average fair value at the date of grant for PSUs
granted during the period ended December 31, 2016 was $6.10. The fair value of each PSU grant is amortized monthly into
compensation expense on a straight-line basis over their respective vesting periods over 36 months. The accrual of compensation costs
is based on our estimate of
the award, and is adjusted as required for the portion based on the
performance-based condition. The Company assumes that forfeitures will be minimal, and recognizes forfeitures as they occur, which
results in a reduction in compensation expense. As the payout of PSUs includes dividend equivalents, no separate dividend yield
assumption is required in calculating the fair value of the PSUs.
the final expected value of
The Chemours Company
as well as the product lines at our Belle, West Virginia site, which include our Methylamines, Glycolic Acid and Vazo™ free radical
initiators product lines.
Chemical Solutions operates at three dedicated production facilities in North America, which sells products and solutions through two
primary product groups: Mining Solutions and Performance Chemicals & Intermediates. The Mining Solutions product group includes
our sodium cyanide, hydrogen cyanide, and potassium cyanide product lines. We are the market leader in solid sodium cyanide
production in the Americas, which is used primarily by the mining industry for gold and silver production. In the Performance Chemicals
& Intermediates product group, we manufacture a wide variety of chemicals used in many different applications. Following the recent
divestitures, Performance Chemicals & Intermediates is now comprised of our Methylamines, Glycolic Acid, and Vazo™ product lines.
Our Performance Chemicals & Intermediates business is expected to generally grow in line with growth in global GDP.
Chemical Solutions segment’s net sales by region and primary product groups for the years ended December 31, 2016, 2015, and 2014
are shown in the charts below.
Chemical Solutions Sales by Region
North America
Asia Pacific
EMEA
Latin America
2016
2015
2014
Chemical Solutions Sales by Product Group
80%
70%
60%
50%
40%
30%
20%
10%
0%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Mining Solutions
Performance Chemicals
Divested Business
2
& Intermediates
1
2016
2015
2014
(1) 2015 and 2014 sales were recast to exclude sales from divested business.
(2)
Includes sales from our C&D business, Sulfur business and Aniline facility in Beaumont, TX, which were sold during 2016.
Industry Overview and Competitors
The industrial and specialty chemicals produced by our Chemical Solutions segment are important raw materials for a wide range of
industries and end markets. We hold a long standing reputation for high quality and the safe handling of hazardous products such as
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increased demand for various fluoroproducts.
Raw Materials
The primary raw materials required to support the Fluoroproducts segment are fluorspar, chlorinated organics, chlorinated inorganics,
hydrofluoric acid and vinylidene fluoride. These are available in many countries and not concentrated in any particular region.
Our supply chains are designed for maximum competitiveness through favorable sourcing of key raw materials. Our contracts typically
include terms that span from two to ten years, except for select resale purchases that are negotiated on a monthly basis. Most qualified
Fluorspar sources have fixed contract prices or freely negotiated market-based pricing. Although the fluoroproduct industry has
historically relied primarily on fluorspar exports from China, Chemours has diversified its sourcing through multiple geographic regions
and suppliers to ensure a stable and cost competitive supply. Our current supply agreements are generally in effect for the next five
years.
Sales, Marketing and Distribution
With more than 85 years of innovation and development in fluorine science, our technical, marketing and sales teams around the world
have deep expertise in our products and their end-uses. We work with customers to select the appropriate fluoroproducts to meet their
technical performance needs. We sell our products through direct channels and through resellers. Selling agreements vary by product
line and markets served and include both spot pricing arrangements and contracts with a typical duration of one year.
We maintain a large fleet of railcars, tank trucks and containers to deliver our products and support our supply chain needs. For the
portion of the fleet that is leased, related lease terms are usually staggered, which provides us with a competitive cost position as well
as the ability to adjust the size of our fleet in response to changes in market conditions. A dedicated logistics team, along with external
partners, continually optimizes the assignment of our transportation equipment to product lines and geographic regions in order to
maximize utilization and flexibility of the supply chain.
We serve approximately 2,700 customers and distributors globally, and in many instances, these commercial relationships have been in
place for decades. No single Fluoroproducts customer represented more than ten percent of the segment’s sales in 2016.
Seasonality in Fluorochemicals sales is mainly driven by increased demand for residential, commercial and automotive air conditioning
in the spring. This demand peaks in the summer months and declines in the fall and winter. Commercial refrigeration demand is fairly
steady throughout
the year, but demand is slightly higher during the summer months. There is no significant seasonality for
Fluoropolymers, as demand is relatively consistent throughout the year.
Customers
Seasonality
Chemical Solutions Segment
Segment Overview
Our Chemical Solutions segment comprises a portfolio of
industrial chemical businesses primarily operating in the Americas. The
Chemical Solutions segment’s products are used as important raw materials and catalysts for a diverse group of industries including,
among others, gold production, oil and gas, water treatment, electronics and automotive. We are a leading provider of sodium cyanide
in the Americas through our Mining Solutions business. Chemical Solutions generates value through the use of market leading
manufacturing technology, safety performance, product stewardship, and differentiated logistics capabilities.
As part of our transformation plan announced in 2015, we conducted a strategic review of our Chemical Solutions segment. The
process resulted in the divestiture of
three assets and businesses, the shutdown of one business and the decision to retain the
remaining businesses. Specifically, we sold our Aniline facility in Beaumont, Texas to The Dow Chemical Company in March 2016. We
also sold our Sulfur Products business to Veolia in July 2016 and our Clean & Disinfect business to LANXESS Corporation (“Lanxess”)
in August 2016. These divestitures resulted in gross proceeds of approximately $685 million in 2016. In addition, we ceased production
at our RMS facility in Niagara Falls, New York in September 2016. The segment continues to include our mining solutions business
Developed markets represent the largest fluoroproducts markets today. Global middle class growth and the increasing demand for
expanding infrastructure, consumer electronics, telecommunications, automobiles, refrigerators and air conditioners are all key drivers of
The Chemours Company
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Note 24. Geographic and Segment Information
Geographic Information
For and As of the Year Ended December 31,
2016
2015
2014
Net
Sales(1)
Net Property,
Plant and
Equipment
Net
Sales(1)
Net Property,
Plant and
Equipment
Net
Sales(1)
Net Property,
Plant and
Equipment
North America(2)
. . . . . . . . . . . . . . . . . . .
$
2,288
$
1,861
$
2,570
$
2,184
$
2,759
$
2,273
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . .
EMEA(3) . . . . . . . . . . . . . . . . . . . . . . . . .
Latin America(4) . . . . . . . . . . . . . . . . . . . .
1,315
1,081
716
129
278
516
1,393
977
777
136
308
549
1,548
1,190
935
140
372
523
Total . . . . . . . . . . . . . . . . . . . . . . . . . .
$
5,400
$
2,784
$
5,717
$
3,177
$
6,432
$
3,308
(1) Net sales are attributed to countries based on customer location.
(2)
Includes net sales in Canada of $125, $140 and $147 in 2016, 2015 and 2014, respectively. Includes net property, plant and
equipment in Canada of $11, $13 and $14 in 2016, 2015 and 2014, respectively.
(3) EMEA includes Europe, Middle East and Africa.
(4) Latin America includes Mexico.
Segment Information
Chemours’ operations are classified into three segments namely: Titanium Technologies, Fluoroproducts and Chemical Solutions.
Corporate costs and certain legal and environmental expenses that are not aligned with the segments and foreign exchange gains and
losses are reflected in Corporate and Other.
The Titanium Technologies segment is the leading global producer of TiO2, a premium white pigment used to deliver opacity. The
Fluoroproducts segment is a leading global provider of fluoroproducts, such as refrigerants and industrial fluoropolymer resins. The
Chemical Solutions segment is a leading North American provider of industrial and specialty chemicals, which includes cyanides, sulfur
products and performance chemicals and intermediates, used in gold production, oil refining, agriculture, industrial polymers and other
industries. Chemours operates globally in substantially all of its product lines.
Certain products are transferred between segments on a basis intended to reflect, as nearly as practicable, the market value of the
products. These product
the periods presented. Depreciation and
amortization includes depreciation on research and development facilities and amortization of other intangible assets, excluding
write-down of assets. Segment net assets includes net working capital, net property, plant and equipment, and other noncurrent
operating assets and liabilities of the segment. This is the measure of segment assets reviewed by the Chief Operating Decision Maker
(“CODM”).
transfers were limited and were not significant
for each of
Adjusted EBITDA is the primary measure of segment profitability used by the CODM and is defined as income (loss) before income
taxes excluding the following:
•
•
•
•
•
•
•
interest expense, depreciation and amortization,
non-operating pension and other postretirement employee benefit costs, which represent the components of net periodic
costs (income) excluding service cost component,
exchange losses (gains) included in “other income, net” of the statement of operations,
restructuring, asset-related charges and other charges, net,
asset impairments,
losses (gains) on sale of business or assets, and
other items not considered indicative of our ongoing operational performance and expected to occur infrequently.
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
All periods presented reflect the current definition of Adjusted EBITDA.
Year Ended December 31,
2016
Net sales to external customers . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliates . . . . . . . . . . . . . . . . . . . . .
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in affiliates . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of plant, property and equipment
. . . . . . . . . . .
2015
Net sales to external customers . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliates . . . . . . . . . . . . . . . . . . . . .
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in affiliates . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of plant, property and equipment
. . . . . . . . . . .
2014
Net sales to external customers . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliates . . . . . . . . . . . . . . . . . . . . .
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in affiliates . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .
Purchases of plant, property and equipment
Titanium
Technologies
Fluoroproducts
Chemical
Solutions
Corporate and
Other
Total
$
$
$
$
$
$
2,364
466
119
—
1,513
—
105
2,392
326
125
—
1,659
—
255
2,937
723
125
—
1,748
—
365
$
$
$
2,264
445
101
26
1,400
116
120
2,230
300
88
21
1,567
127
142
2,327
282
83
20
1,480
124
133
$
772
39
30
—
292
—
104
$ 1,095
29
52
—
839
—
117
$ 1,168
17
48
—
782
—
106
— $5,400
822
284
29
104
136
338
(128)
34
3
(3,101)
20
9
— $5,717
573
(82)
267
2
22
1
130
(3,935)
136
9
519
5
— $6,432
876
257
20
3,673
124
604
(146)
1
—
(337)
—
—
Total Adjusted EBITDA reconciles to total consolidated net (loss) income in the Consolidated Statements of Operations as follows:
Year Ended December 31,
2015
2014
2016
(Loss) income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-operating pension and other postretirement employee benefit (income) costs . . . . .
Exchange losses (gains) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset related charges(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gains) losses on sale of assets and businesses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal and other charges(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
(11)
213
284
(20)
57
51
124
(254)
19
359
822
$
$
(188)
132
267
(3)
(19)
285
73
9
9
8
573
$
$
550
—
257
22
66
21
—
(40)
—
—
876
(1) The year ended December 31, 2016 includes $48 pre-tax asset impairment of our Pascagoula Aniline facility (see Note 13), $58
pre-tax asset impairment in connection with the sale of
the Sulfur business (see Note 7), $13 pre-tax asset impairment in
connection with the sale of the Company’s corporate headquarters building (see Note 15) and other asset write-offs. The year
ended December 31, 2015 includes $25 of goodwill impairment (see Note 14) and $45 asset impairment of RMS facility (see Note
13). All charges, except for the corporate headquarters building impairment (which is included in Corporate and Other), are
recorded in the Chemical Solutions segment.
(2)
Includes accounting, legal and bankers transaction fees incurred related to the Company’s strategic initiatives, which includes
pre-sale transaction costs incurred in connection with the sales of the C&D and Sulfur businesses (see Note 7).
The Fluoroproducts segment’s net sales by region and product group for the years ended December 31, 2016, 2015, and 2014 are
shown in the charts below:
The Chemours Company
Fluoroproducts Sales by Region
North America
Asia Pacific
EMEA
Latin America
2016
2015
2014
Fluoroproducts Sales by Product Group
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
60%
50%
40%
30%
20%
10%
0%
Fluorochemicals
Fluoropolymers
2016
2015
2014
Industry Overview and Competitors
Our Fluoroproducts segment competes against a broad variety of global manufacturers, including Honeywell, Arkema, Mexichem,
Daikin, Solvay and Dyneon, as well as regional Chinese and Indian manufacturers. We have a leadership position in fluorine chemistry
and materials science, a broad scope and scale of operations, market driven application development and deep customer knowledge.
Chemours has global leadership positions in the following fluoroproduct categories as set forth in the table below:
Fluoroproducts Leadership Positions
Product Group
Fluorochemicals
Position
#1 Globally
Fluoropolymers
#1 Globally
Key Applications
Key Competitors
Refrigeration and Air
Honeywell, Arkema, Mexichem,
Conditioning
Dongyue, Juhua
Diversified industrial
Daikin, 3M, Solvay, Asahi Glass
applications
Company, Dongyue, Chenguang
Fluoroproducts demand growth is generally in line with global GDP. Within Fluorochemicals, growth may be expected to be higher than
GDP in situations where, for environmental reasons, regulatory drivers constrain the market or drive the market toward lower global
warming alternatives. In Fluoropolymers, market growth is expected to be in line with GDP but influenced by increased competition and
pricing pressure in some businesses.
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We sell fluoroproducts through two primary product groups: Fluorochemicals and Fluoropolymers.
Net sales to external customers by product group were as follows:
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
(3)
Includes litigation settlements, water treatment accruals and $335 litigation accrual related to the PFOA MDL Settlement (see Note
20), and lease termination charges.
Titanium dioxide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2,364
$
2,392
$
Fluoropolymers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fluorochemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance chemicals and intermediates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mining solutions(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sulfur . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,171
1,093
383
262
127
1,246
984
551
301
243
2,937
1,326
1,001
621
314
233
Total net sales to external customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
5,400
$
5,717
$
6,432
Year Ended December 31,
2016
2015
2014
(1) Previously known as Cyanides product group, which was renamed to Mining Solutions effective for the year ended December 31,
2016.
Note 25. Accumulated Other Comprehensive Income (Loss)
second half of the year. However, Opteon™ sales into mobile air markets will be driven by automotive production, which may lead to
The components of accumulated other comprehensive income (loss), net of income taxes, consisted of:
Currency
Translation
Adjustment
Net
Investment
Hedge
Employee
Benefits
Total
The Chemours Company
The manufacturing of
fluoroproducts involves complex processes which include the use of highly corrosive and hazardous
intermediates. We have an industry-leading safety culture and apply world-class technical expertise to ensure that our operations run
safely and reliably. These capabilities, alongside our research and development expertise, allow us to continuously improve our process
technology.
Fluorochemicals products include refrigerants, air conditioning, foam expansion agents, propellants and fire extinguishants. We have
held a leading position in the fluorochemicals market since the commercial
introduction of Freon™ in 1930. Since the original
chlorofluorocarbons (CFCs) based product was introduced, we have been at the forefront of new-technology research for lower global
warming
potential
and
ozone
depleting
products,
leading
to
the
development
of
hydrofluorocarbons
(HFCs)
and
hydrochlorofluorocarbons (HCFCs). We have a leading position in HFC refrigerants under the brand name Freon™ and are a leader in
the development of sustainable technologies like Opteon™, a line of low Global Warming Potential (GWP) hydrofluoroolefin (HFO)
refrigerants, which also have a zero ozone depletion footprint. Opteon™ was jointly developed with Honeywell International, Inc., in
response to the European Union’s (EU) Mobile Air Conditioning (MAC) Directive. This patented technology offers similar functionality to
current HFC products but meets or exceeds currently mandated environmental standards and in some cases, provides energy
efficiency benefits.
We led the industry in the Montreal-Protocol (1987) driven transition from CFCs to the lesser ozone depleting HCFCs and non-ozone
depleting HFCs. In 1988, we committed to cease production of CFCs and started manufacturing non-ozone depleting HFCs in the early
1990s. Driven by new and emerging environmental legislations and standards currently being implemented across the U.S., Europe,
Latin America and Japan, we have commercialized Opteon™. Over the years, regulation has pushed the industry to evolve and respond
to environmental concerns. We will continue to invest in research and development to ensure that we remain a leader and are able to
meet our customers’ needs as regulations change.
Fluorochemicals’ refrigerant sales fluctuate by season as sales in the first half of the year generally are slightly higher than sales in the
less seasonality within Fluorochemicals overall.
Fluoropolymers products include various industrial resins, coatings, and other downstream products. We serve a wide range of
industrial and end-user applications spanning from wearable electronics to automotive, network cables, pipe lining and gaskets, among
others. Our products’ unique properties include corrosion resistance, non-stick adhesion, thermal stability, and extreme temperature
resistance.
Our Fluoropolymers products are sold under the brand names Teflon™, Viton™, Krytox™, and Nafion™. Teflon™ coatings and
additives are used in multiple end products including paints, fabrics, carpets, clothing, and other household applications. Teflon™
Viton™ brand name, are used in automotive, consumer electronics, chemical processing, oil and gas, petroleum refining and
transportation, and aircraft and aerospace applications. Our Krytox™ branded lubricants are used in a broad range of
industrial
applications, including bearings, electric motors, and gearboxes. We sell membranes under the brand name Nafion™, which are used in
fuel cells, energy flow battery storage, transportation, stationary power, and medical tubing.
coatings, resins, additives and films are also used in a wide range of industrial products. Our fluoroelastomer products, sold under the
Other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumption and establishment of pension plans, net
. . . . . . . . . . . . . .
19
—
19
—
(304)
(285)
(73)
—
—
—
8
8
14
22
—
—
(311)
52
(259)
18
$
(241) $
Balance at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(358) $
$
— $
— $
19
—
19
(311)
(244)
(536)
(41)
(577)
Note 26. Quarterly Financial Data (Unaudited)
The following is a summary of the quarterly results of operations for the years ended December 31, 2016 and 2015.
For the three months ended
2016
March 31
June 30
September 30
December 31
Full Year
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,297 $
1,383 $
1,398 $
1,322 $
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,095
1,116
1,056
Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . .
Net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Chemours . . . . . . . . . . . . . . .
Basic earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings (loss) per share . . . . . . . . . . . . . . . . . . . . .
70
51
51
0.28
0.28
(41)
(18)
(18)
(0.10)
(0.10)
234
204
204
1.12
1.11
1,024
(273)
(230)
(230)
(1.26)
(1.26)
5,400
4,290
(11)
7
7
0.04
0.04
8
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The Chemours Company
Transporting chlorine, one of our primary raw materials, can be costly. To reduce our expense and our need to transport chlorine, we
have a chlor-alkali production facility run by a third party that is co-located at our New Johnsonville, Tennessee site. Calcined petroleum
coke is an important raw material input to our process. We source calcined petroleum coke from well-established suppliers in North
America and China, typically under contracts that run multiple years to facilitate material and logistics planning through the supply
chain. Distribution efficiency is enhanced through use of bulk ocean, barge and rail transportation modes.
Energy is another key input cost into the TiO2 manufacturing process, representing approximately ten percent of the production cost.
Chemours has access to natural gas based energy at our U.S. and Mexico TiO2 production facilities and our Florida minerals plant,
supporting advantaged energy costs given the low cost shale gas in the U.S. Natural gas-based cogeneration of steam and electricity
was recently extended as part of the major expansion at one of our TiO2 production facilities.
Sales, Marketing and Distribution
We sell the majority of our products through a direct sales force. We also utilize third-party sales agents and distributors to expand our
reach. TiO2 represents a significant raw material cost for our customers and as a result, purchasing decisions are often made by our
customers’ senior management team. Our sales organization works to develop and maintain close relationships with key decision
makers in our value chain.
In addition, our sales and technical service teams work together to develop relationships with all layers of our customers’ organizations
to ensure that we meet our customers’ commercial and technical requirements. When appropriate, we collaborate closely with
customers to solve formulation or application problems by modifying product characteristics or developing new product grades.
To ensure an efficient distribution, we have a large fleet of railcars, which are predominantly used for outbound distribution of products
in the U.S. and Canada. A dedicated logistics team, along with external partners, continually optimizes the assignment of our
transportation equipment to product lines and geographic regions in order to maximize utilization and maintain an efficient supply chain.
Globally, we serve over 800 customers through our Titanium Technologies segment. In 2016, our ten largest Titanium Technologies
customers accounted for approximately 30 percent of the segment’s sales. No single Titanium Technologies customer represented
more than ten percent of our segment sales in 2016. Our larger customers in the U.S. and Europe are typically served through direct
sales and tend to have medium- to long-term contracts with annual supply volume requirements and periodic price adjustment
mechanisms. We serve our small- and mid-size customers through a combination of our direct sales and distribution network.
Our direct customers in Titanium Technologies are producers of decorative coatings, automotive and industrial coatings, polyolefin
masterbatches, polyvinylchloride window profiles, engineering polymers, laminate paper, coatings paper and coated paperboard. We
focus on developing long-term partnerships with key market participants in each of
these sectors. We also deliver a high level of
technical service to satisfy our customers’ specific needs, which helps us maintain strong customer relationships.
The demand for TiO2 is subject to seasonality due to the influence of weather conditions and holiday seasons on some of our
applications, such as decorative coatings. As a result, our TiO2 sales volume is typically lowest in the first quarter, highest in the second
and third quarters and moderate in the fourth quarter. This pattern applies to the entire TiO2 market, but may vary by region, country or
application. It can also be altered by economic or other demand cycles.
Fluoroproducts Segment
Segment Overview
Our Fluoroproducts segment is a global leader in providing fluorine-based, advanced material solutions. The segment creates products
that have unique properties such as high temperature resistance, high chemical resistance and unique di-electric properties for
applications across a broad array of industries and applications. We are a global leader in providing fluoroproducts, such as refrigerants
and industrial fluoropolymer resins and derivatives.
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
For the three months ended
2015
March 31
June 30
September 30
December 31
Full Year
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,363 $
1,508 $
1,486 $
1,360 $
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,111
1,282
Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . .
Net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Chemours . . . . . . . . . . . . . . .
Basic earnings (loss) per share(1)
Diluted earnings (loss) per share(1)
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
58
43
43
0.24
0.24
(18)
(18)
(18)
(0.10)
(0.10)
1,222
(107)
(29)
(29)
(0.16)
(0.16)
1,147
(121)
(86)
(86)
(0.48)
(0.48)
5,717
4,762
(188)
(90)
(90)
(0.50)
(0.50)
(1) On July 1, 2015, E. I. du Pont de Nemours and Company distributed 180,966,833 shares of Chemours’ common stock to holders
of its common stock. Basic and diluted earnings (loss) per common share for all periods prior to July 1, 2015 were calculated using
the shares distributed on July 1, 2015. Refer to Note 10 for information regarding the calculation of basic and diluted earnings per
share.
*
The summation of the quarterly data may not foot due to rounding.
Note 27. Guarantor Condensed Consolidating Financial Information
The following guarantor financial information is included in accordance with Rule 3-10 of Regulation S-X (Rule 3-10) in connection with
the issuance of the Notes by The Chemours Company (the “Parent Issuer”). The Notes are fully and unconditionally guaranteed, jointly
and severally, on a senior unsecured unsubordinated basis, in each case, subject to certain exceptions, by the Parent Issuer and by
certain subsidiaries (together, the “Guarantor Subsidiaries”). Each of the Guarantor Subsidiaries is 100% owned by the Company. None
of the other subsidiaries of the Company, either direct or indirect, guarantee the Notes (together, the “Non-Guarantor Subsidiaries”). The
Guarantor Subsidiaries, excluding the Parent Issuer, will be automatically released from those guarantees upon the occurrence of
certain customary release provisions.
The following condensed consolidating financial information is presented to comply with the Company’s requirements under Rule 3-10:
Customers
•
•
•
the Consolidating Statements of Comprehensive Income (Loss) for the years ended December 31, 2016, 2015 and 2014;
the Consolidating Balance Sheets as of December 31, 2016 and 2015;
the Consolidating Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014.
Seasonality
As discussed in Note 2, Chemours did not operate as a separate, stand-alone entity for the full period covered by consolidated financial
statements. Prior to our spin-off on July 1, 2015, Chemours operations were included in DuPont’s financial results in different legal
forms, including but not limited to wholly-owned subsidiaries for which Chemours was the sole business, components of legal entities in
which Chemours operated in conjunction with other DuPont businesses and a majority owned joint venture. For periods prior to July 1,
information has been prepared from DuPont’s historical accounting records and are
2015, the condensed consolidated financial
presented on a stand-alone basis as if the business operations had been conducted independently from DuPont.
The condensed consolidating financial information is presented using the equity method of accounting for the Company’s investments
in 100% owned subsidiaries. Under the equity method, the investments in subsidiaries are recorded at cost and adjusted for our share
of the subsidiaries cumulative results of operations, capital contributions, distributions and other equity changes. The elimination entries
principally eliminate investments in subsidiaries and intercompany balances and transactions. The financial information in this footnote
should be read in conjunction with the consolidated financial statements presented and other notes related thereto contained in this
Annual Report.
As discussed in Note 7, the Company entered into a stock and asset purchase agreement with Lanxess, pursuant to which Lanxess
acquired the Company’s C&D business comprise of certain assets and subsidiaries of the Company, including International Dioxide,
Inc., which was a guarantor subsidiary.
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Condensed Consolidating Statements of Comprehensive Income (Loss)
Year Ended December 31, 2016
Parent
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
and
Adjustments
Consolidated
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $
3,749
$
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . .
Research and development expense . . . . . . . . . . . . . . . . .
Restructuring and asset related charges, net . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliates . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of subsidiaries . . . . . . . . . . . . . . . . . . .
Interest (expense) income, net
. . . . . . . . . . . . . . . . . . . . .
Intercompany interest income (expense), net . . . . . . . . . . . .
Other income, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Loss) income before income taxes . . . . . . . . . . . . . . . .
(Benefit from) provision for income taxes . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net income attributable to noncontrolling interests . . . .
Net income (loss) attributable to Chemours . . . . . . . . . . .
Comprehensive (loss) income attributable to Chemours . . . . .
$
$
—
—
21
—
—
21
—
100
(211)
60
20
(52)
(59)
7
—
7
3,218
531
794
77
168
1,039
4
—
(3)
4
193
(310)
(52)
(258)
—
$
(258) $
(34) $
(255) $
3,222
2,615
607
139
3
2
144
25
—
1
(64)
54
479
100
379
—
379
321
$
(1,571)
$
(1,543)
(28)
(20)
—
—
(20)
—
(100)
—
—
(20)
(128)
(7)
(121)
—
(121)
(66)
$
$
$
$
5,400
4,290
1,110
934
80
170
1,184
29
—
(213)
—
247
(11)
(18)
7
—
7
(34)
The Chemours Company
We sell over 20 different grades of TiO2, with each pigment grade tailored for targeted applications. Our portfolio of premium
performance TiO2 pigment grades provide end users with benefits beyond opacity, such as longer lasting performance, brighter colors
and the brilliant whites achievable only through Chloride manufactured pigment.
We have operated a titanium mine in Starke, Florida since 1949. The mine provides us with access to a low cost source of domestic,
high quality ilmenite ore feedstock and supplies less than ten percent of our ore feedstock consumption needs. Co-products of our
mining operations, which comprised less than five percent of our total sales in Titanium Technologies in 2016, are zircon (zirconium
silicate) and staurolite minerals. We are a major supplier of high quality calcined zircon in North America, primarily focused on the
precision investment casting (PIC) industry, foundry and specialty applications, and ceramics. Our staurolite blasting abrasives, sold as
Starblast, are used in steel preparation and maintenance, and paint removal.
Revenue and earnings performance in Titanium Technologies reflect the cyclical nature of the global TiO2 business. TiO2 pricing tends
to move up and down in a cyclical manner depending in large part on global economic conditions. Following the global financial crisis in
2008, global economic recovery, resulting from the impact of government stimulus, resulted in strong customer demand for TiO2
compared to available supply. This drove TiO2 prices higher, ultimately reaching a historical peak in 2012. New industry capacity,
stimulated by that period of strong demand between 2008-2012, came online at the same time that global GDP fell back to a 2-3
percent annual growth rate. This oversupply situation resulted in price declines, until early 2016. We believe the TiO2 industry has
moved past the bottom of the cycle and has returned to a modest level of profitability. As described, Titanium Technologies has unique
capabilities which deliver the industry’s best cost position, resulting in strong operating cash flow.
Industry Overview and Competitors
We estimate the worldwide demand for TiO2 in 2016 was approximately 5.7 million metric tons, of which 3.6 million metric tons were for
premium performance pigments. Worldwide capacity in 2016 was estimated to be approximately 7.0 million metric tons. The products
manufactured on this global capacity base are not fully substitutable due to pigment quality consistency and pigment product design.
We believe that
the utilization of
the premium performance manufacturing base is considerably higher than that
for general
purpose-lower performance production.
Competition in the TiO2 pigment market is based primarily on product performance (both product design and quality consistency),
supply capability and technical service. Our major competitors within higher performance pigments include: The National Titanium
Dioxide Company, Ltd. (Cristal), Huntsman International LLC, Kronos Worldwide, Inc. and Tronox Limited.
Beyond multi-national suppliers, the other TiO2 pigment producers are very fragmented and mostly utilize the sulfate production process
and compete in the general purpose-lower performance pigment market. In 2016, the combination of Sichuan Lomon and Henan
Billions into the Lomon Billions entity demonstrated the consolidation of Chinese producers and created a large global producer
representing approximately eight percent of global capacity. In the next one to three years, industry experts believe that there will be no
new capacity added outside of China. Within China, the announced added effective capacity is expected to be somewhat offset by
capacity shutdowns at marginal producers. Certain new capacity additions announced in China are based on a chloride technology.
Raw Materials
The primary raw materials used in the manufacture of TiO2 are titanium-bearing ores, chlorine, calcined petroleum coke and energy. We
source titanium-bearing ores from a number of suppliers around the globe, who are primarily located in Australia and Africa. Our
titanium mine in Starke, Florida supplies less than ten percent of our raw material needs. To ensure proper supply volume and to
minimize pricing volatility, we generally enter into contracts in which volume is requirement-based and pricing is determined by a range
of mechanisms structured to help us achieve competitive pricing relative to the market. We typically enter into a combination of long-
and mid-term supply contracts and source our raw material from multiple suppliers across different regions and from multiple sites per
supplier. Furthermore, we typically purchase multiple grades of ore from each supplier to limit our exposure to any single supplier for
any single grade of ore in any given time period. Historically, we have not experienced any problems renewing such contracts for raw
materials or securing our supply of titanium-bearing ores.
We play an active role in ore source development around the globe, especially for those ores which can only be used by Chemours,
given the capability of our unique process technology. Supply chain flexibility allows for ore purchase and use optimization to manage
short-term demand fluctuations and provides long-term competitive advantage. Our process technology and ability to use lower grade
ilmenite ore gives us the flexibility to alter our ore mix to the lowest cost configuration based on sales, demand and projected ore pricing.
Lastly, we have taken steps to optimize routes for distribution and increase storage capacity at our production facilities.
6
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Condensed Consolidating Statements of Comprehensive Income (Loss)
Year Ended December 31, 2015
Parent
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
and
Adjustments
Consolidated
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $
4,044
$
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . .
Research and development expense . . . . . . . . . . . . . . . . .
Restructuring and asset related charges, net . . . . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliates . . . . . . . . . . . . . . . . . . . . . .
Equity in (net loss) earnings of subsidiaries . . . . . . . . . . . . .
Interest expense, net
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany interest income (expense), net . . . . . . . . . . . .
Other income (expense), net
. . . . . . . . . . . . . . . . . . . . . .
—
—
15
—
—
—
15
—
(47)
(131)
44
13
(Loss) income before income taxes . . . . . . . . . . . . . . . .
(136)
(Benefit from) provision for income taxes . . . . . . . . . . . . . . .
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net income attributable to noncontrolling interests . . . .
Net (loss) income attributable to Chemours . . . . . . . . . . .
Comprehensive (loss) income attributable to Chemours . . . . .
(46)
(90)
—
3,708
336
426
95
295
25
841
1
—
(1)
—
92
(413)
(89)
(324)
—
$
$
(90) $
(324) $
(334) $
(324) $
3,269
2,650
$
(1,596)
$
(1,596)
619
204
2
38
—
244
21
—
—
(44)
(31)
321
40
281
—
281
29
$
$
—
(13)
—
—
—
(13)
—
47
—
—
(20)
40
(3)
43
—
43
295
$
$
5,717
4,762
955
632
97
333
25
1,087
22
—
(132)
—
54
(188)
(98)
(90)
—
(90)
(334)
F-52
5
The Chemours Company
business (previously known as Cyanides business) and the product lines at our Belle, West Virginia site. We are investing in our Mining
Solutions business during 2017 and 2018 to increase our capacity by approximately 50 percent. This additional capacity will allow us to
serve the growing demand for sodium cyanide in the gold mining industry in the Americas.
We will maintain our commitment to responsible stewardship and safety for our employees, customers and the communities where we
operate. Meeting and exceeding our customers’ expectations while conducting business in accordance with our high ethical standards
will continue to be a primary focus for our company as we continue to transform Chemours into a higher-value chemistry company.
Additional information on our segments can be found in Management’s Discussion and Analysis of Financial Condition and Results of
Operations and Note 24 to the Consolidated Financial Statements.
Titanium Technologies Segment
Segment Overview
The Chemours Titanium Technologies segment is the leading global manufacturer of titanium dioxide, or TiO2. TiO2 is a pigment used
to deliver whiteness, opacity, brightness and protection from sunlight in applications such as architectural and industrial coatings, flexible
and rigid plastic packaging, PVC window profiles, laminate papers, coated paper and coated paperboard used for packaging. We sell
our TiO2 products under the Ti-Pure™ brand name to over 800 customers globally. We operate four TiO2 production facilities: two in the
United States (U.S.), one in Mexico and one in Taiwan. In addition, we have a large-scale repackaging and distribution facility in Belgium
and operate a mineral sands mining operation in Starke, Florida. In total, we have a TiO2 capacity of 1.25 million metric tons per year. In
2016, we expanded our TiO2 production facility in Altamira, Mexico. We plan to steadily ramp up production at Altamira, with full capacity
of the new line reaching approximately 200,000 metric tons annually being achieved over the next few years.
Chemours is one of a limited number of producers operating a chloride process for the production of TiO2. We believe that our
proprietary chloride technology enables us to operate plants at a much higher capacity than other chloride technology-based TiO2
producers, uniquely utilizing a broad spectrum of titanium-bearing ore feedstocks and achieving the highest unit margins in our industry.
This technology, which is in use at all of our production facilities, provides us with one of the industry’s lowest manufacturing cost
positions. Our research and development efforts focus on improving production processes and developing TiO2 grades that help our
customers achieve optimal cost and product performance.
TiO2 demand is highly correlated to growth in the global residential housing, commercial construction and packaging markets. Industry
demand for TiO2 is generally expected to be in line with global GDP growth, and can be cyclical due to economic and industry-specific
market dynamics. We believe that the TiO2 demand grew above GDP growth rates in 2016 due to a pent-up demand created by
destocking in 2015. We believe the market growth seen in 2016 was a combination of market growth and the return to more typical
customer inventory levels. We expect TiO2 demand growth to return to approximate GDP growth rates in the long-term. Chemours’
future demand growth may be below average global GDP growth rates if our sales into developed markets outpaces our sales into
Our Titanium Technologies segment net sales by region for the years ended December 31, 2016, 2015, and 2014 is shown in the chart
emerging markets.
below:
Titanium Technologies Sales by Region
35%
30%
25%
20%
15%
10%
5%
0%
North America
Asia Pacific
EMEA
Latin America
2016
2015
2014
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149996_85669 Chemours Company Annual Report_Text Signature 1 Side B Magenta
149996_85669 Chemours Company Annual Report_Text Signature 1 Side B RGS 1
149996_85669 Chemours Company Annual Report_Text Signature 1 Side B RGS 6
149996_85669 Chemours Company Annual Report_Text Signature 1 Side B RGS 4
149996_85669 Chemours Company Annual Report_Text Signature 1 Side B RGS 2
149996_85669 Chemours Company Annual Report_Text Signature 1 Side B RGS 5
149996_85669 Chemours Company Annual Report_Text Signature 1 Side B RGS 3
149996_85669 Chemours Company Annual Report_Text Signature 1 Side B Yellow
149996_85669 Chemours Company Annual Report_Text Signature 1 Side B Black
149996_85669 Chemours Company Annual Report_Text Signature 1 Side B Cyan
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Condensed Consolidating Statements of Comprehensive Income (Loss)
Year Ended December 31, 2014
Parent
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
and
Adjustments
Consolidated
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $
4,593
$
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . .
Research and development expense . . . . . . . . . . . . . . . . .
Restructuring and asset related charges, net . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliates . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of subsidiaries . . . . . . . . . . . . . . . . . . .
Other income (expense), net
. . . . . . . . . . . . . . . . . . . . . .
Through cost reduction and growth, Chemours expects the transformation plan to deliver $500 million of incremental Adjusted EBITDA
Income before income taxes . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net income attributable to noncontrolling interests . . . .
Net income attributable to Chemours . . . . . . . . . . . . . . .
Comprehensive income attributable to Chemours . . . . . . . . .
$
$
—
—
—
—
—
—
—
400
—
400
—
400
—
400
400
$
$
3,863
730
429
127
11
567
—
—
80
243
75
168
—
168
168
$
$
3,722
3,093
$
(1,883)
$
(1,884)
629
256
16
10
282
20
—
(61)
306
76
230
1
229
229
$
$
1
—
—
—
—
—
(400)
—
(399)
(2)
(397)
—
(397)
(397)
$
$
6,432
5,072
1,360
685
143
21
849
20
—
19
550
149
401
1
400
400
December 31, 2016, no one individual customer balance represented more than five percent of Chemours’ total outstanding receivables
balance and no one individual customer represented more than ten percent of our sales.
The Chemours Company
Chemours Five-Point Transformation Plan
reductions and growth targeted in 2017.
portfolio and reduce our leverage by:
Following the Separation, Chemours developed a Five-Point Transformation Plan to address changes to our organization, cost structure
and portfolio of businesses. We have made considerable progress on our transformation plan throughout 2016, with additional cost
The objectives of our multi-year five-point transformation plan are to improve our financial performance, streamline and strengthen our
1. Reducing our costs through a simpler business model;
2. Optimizing our portfolio to focus on our businesses where we have leading positions;
3. Growing our market positions where we have competitive advantages;
4. Refocusing our investments by concentrating our capital expenditures on our core businesses; and
5.
Enhancing our organization to deliver our values and support our transformation to a higher-value chemistry company.
improvement over 2015 through 2017. Based on our anticipated cost reduction and growth initiatives, we expect that our cost savings of
approximately $350 million and approximately $150 million in improvements from growth initiatives will also improve our pre-tax
earnings by similar amounts over 2015 through 2017. These improvements will be partially offset by the impact of divestitures
completed during 2016, unfavorable price and mix of fluoropolymer products and may also be impacted by market factors. For the year
ended December 31, 2016, we had a pre-tax loss and Adjusted EBITDA of $11 million and $822 million, respectively, compared to a
pre-tax loss of $188 million and adjusted EBITDA of $573 million for the year ended December 31, 2015. Our 2016 pre-tax loss
includes net gain from divestitures of approximately $254 million offset by $335 million litigation accrual related to the PFOA MDL
Settlement (see Item 3. Legal Proceedings, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations, and Note 20 to the Consolidated Financial Statements included elsewhere in this Annual Report).
Through a combination of higher cash flow from operations, lower capital spending, and proceeds from asset sales, we anticipate
reducing our leverage ratio (net debt to Adjusted EBITDA) to approximately three times by the end of 2017. As of December 31, 2016,
our leverage ratio is approximately 3.3 times.
Adjusted EBITDA is a non-GAAP financial measure. For a discussion of our use of non-GAAP financial measures and reconciliations to
the closest GAAP financial measures, see Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of
Operations — Non-GAAP Financial Measures.
Segments
In our Titanium Technologies segment, we have a long-standing history of delivering high-quality TiO2 pigment using our proprietary
chloride technology. We are the largest global producer of TiO2, and our low-cost network of manufacturing facilities allows us to
efficiently and cost-effectively serve our global customer base. During 2016, we further enhanced our operating cost advantage with the
startup of our second production line at our Altamira, Mexico facility. Chemours is well positioned to remain one of the lowest cost TiO2
producers and continue to meet our customers’ growing needs around the world.
In our Fluoroproducts segment, we are one of two globally integrated producers making both fluorochemicals and fluoropolymers. In
Fluorochemicals, we expect to see increased adoption of Opteon™, the world’s lowest global warming potential refrigerant, as
governments around the world pass legislation that makes the use of low global warming potential refrigerants a requirement. Our
fluoropolymers offerings provide customers with tailored products that have unique properties,
including very high temperature
resistance and high chemical resistance. We will continue to invest in research and development to remain a leader in these areas, and
ensure that we are able to meet our customers’ needs as regulations change.
In our Chemical Solutions segment, we completed our strategic review of our portfolio in 2016, including the announced sales of the
Beaumont Aniline facility, Clean & Disinfect business, and Sulfur products business, and ceased production at our Reactive Metals
Solutions (RMS) facility in Niagara Falls, New York. We remain committed to retaining and improving our Mining Solutions
4
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149996_85669 Chemours Company Annual Report_Text Signature 1 Side A Magenta
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A RGS 1
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A RGS 3
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A RGS 2
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A RGS 5
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A RGS 6
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A RGS 4
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A Yellow
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A Black
149996_85669 Chemours Company Annual Report_Text Signature 1 Side A Cyan
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Condensed Consolidating Balance Sheets
Year Ended December 31, 2016
Parent
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
and
Adjustments
Consolidated
The Chemours Company is a leading global provider of performance chemicals. We began operating as an independent company on
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Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . .
$
— $
Accounts and notes receivable – trade, net
. . . . . . . . . . .
Intercompany receivable . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other
. . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment
. . . . . . . . . . . . . . . . . . . . .
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . .
Net property, plant and equipment . . . . . . . . . . . . . . . .
Goodwill and other intangible assets, net
. . . . . . . . . . . . . .
Investments in affiliates . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany notes receivable . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
3
—
—
3
—
—
—
—
—
3,258
1,150
13
$
224
299
1,050
341
38
1,952
6,136
(4,285)
1,851
156
—
—
—
178
678
508
46
476
32
1,740
1,861
(928)
933
14
136
—
—
226
$
— $
—
(1,099)
(50)
7
(1,142)
—
—
—
—
—
(3,258)
(1,150)
—
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,424
$
4,137
$
3,049
$
(5,550)
$
Liabilities and equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $
573
$
311
$
— $
Short-term borrowings and current maturities of long-term
debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany payable . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . .
15
762
21
798
Long-term debt, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,526
Intercompany notes payable . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,324
Commitments and contingent liabilities
Equity
Total Chemours stockholders’ equity . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100
—
100
—
46
718
1,337
3
—
59
428
1,827
2,310
—
2,310
—
291
133
735
—
—
(1,099)
—
(1,099)
—
1,150
(1,150)
73
96
—
—
2,054
(2,249)
5,956
991
4
995
(3,301)
—
(3,301)
100
4
104
902
807
—
767
77
2,553
7,997
(5,213)
2,784
170
136
—
—
417
6,060
884
15
—
872
1,771
3,529
—
132
524
50%
40%
30%
20%
10%
0%
The Chemours Company
PART I
Item 1. BUSINESS
Overview
July 1, 2015 (the Separation Date) after separating from E. I. du Pont de Nemours and Company (DuPont) (the Separation). Our
company is comprised of three reportable segments: Titanium Technologies, Fluoroproducts and Chemical Solutions. Our Titanium
Technologies segment is the leading global producer of titanium dioxide (TiO2), a premium white pigment used to deliver whiteness,
brightness, opacity and protection in a variety of applications. 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, oil and gas, water treatment and other industries.
Effective prior to the opening of trading on the New York Stock Exchange (NYSE) on July 1, 2015, DuPont completed the separation of
the businesses comprising DuPont’s Performance Chemicals reporting segment, and certain other assets and liabilities, into Chemours,
a separate and distinct public company. The separation was completed by way of a distribution of all of the then-outstanding shares of
common stock of Chemours through a dividend in kind of Chemours’ common stock (par value $0.01) to holders of DuPont common
stock (par value $0.30) as of the close of business on June 23, 2015 (the Record Date) (the transaction is referred to herein as the
Distribution).
On the Separation Date, each holder of DuPont’s common stock received one share of Chemours’ common stock for every five shares
of DuPont’s common stock held on the Record Date. The Separation was completed pursuant to a separation agreement and other
agreements with DuPont, including an employee matters agreement, a tax matters agreement, a transition services agreement and an
intellectual property cross-license agreement. These agreements govern the relationship between Chemours and DuPont following the
separation and provided for the allocation of various assets,
liabilities, rights and obligations. These agreements also included
arrangements for transition services provided by DuPont to Chemours that were substantially completed during 2016.
We operate 26 production facilities located in 10 countries and serve over 3,800 customers across a wide range of end markets in more
than 130 countries. The following chart illustrates the global sales of our businesses for the years ended December 31, 2016, 2015, and
2014:
Sales by Region
North America
Asia Pacific
EMEA
Latin America
2016
2015
2014
Chemours is committed to creating value for our customers through the reliable delivery of high quality products and services around
the globe. We create value for customers and stockholders through (i) operational excellence and asset efficiency, which includes our
commitment to safety and environmental stewardship, (ii) strong customer focus to produce innovative, high-performance products, (iii)
focus on cash flow generation through optimization of our cost structure, and improvement in working capital and supply chain
efficiencies through our transformation plan (described below), (iv) organic growth and inorganic expansions to current business and (v)
creation of an organization that
is committed to our corporate values of safety, customer appreciation, simplicity, collective
entrepreneurship and integrity.
Many of Chemours’ commercial and industrial relationships span decades. Our customer base includes a diverse set of companies,
many of which are leaders in their respective industries. Our sales are not materially dependent on any single customer. As of
Total liabilities and equity . . . . . . . . . . . . . . . . .
$ 4,424
$
4,137
$
3,049
$
(5,550)
$
6,060
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The Chemours Company
Forward-Looking Statements
This section and other parts of this Annual Report on Form 10-K contain forward-looking statements, within the meaning of the
federal securities law, 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. Factors that could cause or contribute to these differences
include those discussed below and in the Item 1A, “Risk Factors”.
Forward-looking statements are based on certain assumptions and expectations of future events which may not be accurate or
realized. Forward-looking statements also involve risks and uncertainties, many of which are beyond Chemours’ control.
Important factors that may materially affect such forward-looking statements and projections include:
Fluctuations in energy and raw material prices;
Failure to develop and market new products and optimally manage product life cycles;
Our substantial indebtedness and availability of borrowing facilities, including access to our revolving credit facilities;
Uncertainty regarding the availability of additional financing in the future, and the terms of such financing;
Negative rating agency actions;
Significant litigation and environmental matters, including indemnifications we were required to assume;
Failure to appropriately manage process safety and product stewardship issues;
Changes in laws and regulations or political conditions;
Global economic and capital markets conditions, such as inflation,
interest and currency exchange rates, and
commodity prices, as well as regulatory requirements;
Currency related risks;
natural disasters;
Ability to protect, defend and enforce Chemours’ intellectual property rights;
Increased competition and increasing consolidation of our core customers;
Changes in relationships with our significant customers and suppliers;
Significant or unanticipated expenses, including but not limited to litigation or legal settlement expenses;
Our ability to predict, identify and interpret changes in consumer preference and demand;
Our ability to realize the expected benefits of the Separation (as defined elsewhere in this Annual Report);
Our ability to complete potential divestitures or acquisitions and our ability to realize the expected benefits of
divestitures or acquisitions if they are completed;
Our ability to deliver cost savings as anticipated, whether or not on the timelines proposed;
Our ability to pay a dividend and the amount of any such dividend declared; and
Disruptions in our information technology networks and systems.
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. The Company assumes no obligation to revise or update any forward-looking
statement for any reason, except as required by law.
Unless the context otherwise requires, references herein to “The Chemours Company”, “The Chemours Company, LLC”,
“Chemours”, “the Company”, “our company”, “we”, “us”, and “our” refer to The Chemours Company and its consolidated
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Condensed Consolidating Balance Sheets
Year Ended December 31, 2015
Parent
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
and
Adjustments
Consolidated
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . .
$
— $
95
$
Accounts and notes receivable – trade, net
. . . . . . . . . . .
Intercompany receivable . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other
. . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment
. . . . . . . . . . . . . . . . . . . . .
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . .
Net property, plant and equipment . . . . . . . . . . . . . . . .
Goodwill and other intangible assets, net
. . . . . . . . . . . . . .
Investments in affiliates . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany notes receivable . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
3
—
—
3
—
—
—
—
—
3,105
1,150
19
344
459
493
49
1,440
7,070
(4,899)
2,171
151
9
—
—
275
271
515
54
501
52
1,393
1,945
(939)
1,006
25
127
—
—
214
$
— $
—
(516)
(22)
3
(535)
—
—
—
—
—
(3,105)
(1,150)
—
Business or supply disruptions and security threats, such as acts of sabotage, terrorism or war, weather events and
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,277
$
4,046
$
2,765
$
(4,790)
$
Liabilities and equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $
637
$
336
$
— $
Short-term borrowings and current maturities of long-term
debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany payable . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . .
15
202
21
238
Long-term debt, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,913
Intercompany notes payable . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
24
54
287
1,002
2
—
173
456
—
260
146
742
—
—
(516)
—
(516)
—
1,150
(1,150)
61
97
—
—
366
859
—
972
104
2,301
9,015
(5,838)
3,177
176
136
—
—
508
6,298
973
39
—
454
1,466
3,915
—
234
553
subsidiaries. References herein to “DuPont” refers to E.I. du Pont de Nemours and Company, a Delaware corporation, and its
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingent liabilities
Equity
Total Chemours stockholders’ equity . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . .
126
—
126
2,413
—
2,413
711
4
715
(3,124)
—
(3,124)
126
4
130
consolidated subsidiaries (other than Chemours and its consolidated subsidiaries), unless the context otherwise requires.
Total liabilities and equity . . . . . . . . . . . . . . . . . . .
$ 4,277
$
4,046
$
2,765
$
(4,790)
$
6,298
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,151
1,633
2,050
(1,666)
6,168
2
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DTP SB Hcho 8.25 x 10.75 (35) .25 HT
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Condensed Consolidating Statements of Cash Flows
Year Ended December 31, 2016
Parent
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
and
Adjustments
Consolidated
Operating activities
Cash (used for) provided by operating activities . . . . . . .
$
(176) $
355
$
415
$
— $
594
Investing activities
Purchases of property, plant and equipment . . . . . . . . . . .
Proceeds from sales of assets, net . . . . . . . . . . . . . . . . .
Intercompany investing activities . . . . . . . . . . . . . . . . . .
Foreign exchange contract settlements . . . . . . . . . . . . . .
Investment in affiliates . . . . . . . . . . . . . . . . . . . . . . . . .
Cash (used for) provided by investing activities . . . . . . . .
—
—
—
—
—
—
(233)
591
(560)
(12)
—
(214)
(105)
117
—
—
(1)
11
—
—
560
—
—
560
Financing activities
Intercompany short-term borrowings, net . . . . . . . . . . . . .
$
560
$
— $
— $
(560) $
Debt repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of stock options . . . . . . . . . . . . .
Cash provided by (used for) financing activities . . . . . . .
Effect of exchange rate changes on cash . . . . . . . . . . . . . .
Increase in cash and cash equivalents . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year
. . . . . . .
(369)
(22)
(4)
11
176
—
—
—
(12)
—
—
—
(12)
—
129
95
Cash and cash equivalents at end of year . . . . . . . . . . . .
$
— $
224
$
—
—
—
—
—
(19)
407
271
678
—
—
—
—
(560)
—
—
—
$
— $
(338)
708
—
(12)
(1)
357
—
(381)
(22)
(4)
11
(396)
(19)
536
366
902
The Chemours Company
Table of Contents
Part I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Officers of the Registrant
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Historical Consolidated Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . .
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . .
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part II
Part III
Part IV
Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Condensed Consolidating Statements of Cash Flows
Year Ended December 31, 2015
Parent
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
and
Adjustments
Consolidated
Operating activities
Cash (used for) provided by operating activities . . . . . . .
$
(119) $
171
$
121
$
9
$
182
Investing activities
Purchases of property, plant and equipment . . . . . . . . . . .
Proceeds from sales of assets, net . . . . . . . . . . . . . . . . .
Intercompany investing activities . . . . . . . . . . . . . . . . . .
Foreign exchange contract settlements . . . . . . . . . . . . . .
Investment in affiliates . . . . . . . . . . . . . . . . . . . . . . . . .
Cash used for investing activities . . . . . . . . . . . . . . . . .
Financing activities
Proceeds from issuance of debt, net . . . . . . . . . . . . . . . .
Intercompany short-term borrowings, net . . . . . . . . . . . . .
Debt repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash provided at separation by DuPont . . . . . . . . . . . . . .
—
—
—
—
—
—
3,489
202
(8)
(105)
(79)
—
Net transfers (to) from DuPont . . . . . . . . . . . . . . . . . . . .
(3,380)
Cash provided by financing activities . . . . . . . . . . . . . .
119
Effect of exchange rate changes on cash . . . . . . . . . . . . . .
Increase in cash and cash equivalents . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year
. . . . . . .
—
—
—
Cash and cash equivalents at end of year . . . . . . . . . . . .
$
— $
(292)
6
(202)
42
—
(446)
2
—
(2)
—
—
87
283
370
—
95
—
95
(227)
6
—
—
(32)
(253)
—
—
—
—
—
160
249
409
(6)
271
—
—
—
202
—
—
202
—
(202)
—
—
—
—
(9)
(211)
—
—
—
$
271
$
— $
(519)
12
—
42
(32)
(497)
3,491
—
(10)
(105)
(79)
247
(2,857)
687
(6)
366
—
366
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The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
Condensed Consolidating Statements of Cash Flows
Year Ended December 31, 2014
Parent
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
and
Adjustments
Consolidated
Operating activities
Cash provided by operating activities . . . . . . . . . . . . . .
$
— $
302
$
208
$
(5) $
505
Investing activities
Purchases of property, plant and equipment . . . . . . . . . . .
Proceeds from sales of assets, net . . . . . . . . . . . . . . . . .
Investment in affiliates . . . . . . . . . . . . . . . . . . . . . . . . .
Other investing activities . . . . . . . . . . . . . . . . . . . . . . . .
Cash used for investing activities . . . . . . . . . . . . . . . . .
Financing activities
Net transfers (to) from DuPont . . . . . . . . . . . . . . . . . . . .
Cash (used for) provided by financing activities . . . . . . .
Effect of exchange rate changes on cash . . . . . . . . . . . . . .
Increase in cash and cash equivalents . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year
. . . . . . .
—
—
—
—
—
—
—
—
—
—
(287)
(317)
30
—
20
2
(8)
—
(237)
(323)
(65)
(65)
—
—
—
115
115
—
—
—
—
—
—
—
—
5
5
—
—
—
Cash and cash equivalents at end of year . . . . . . . . . . . .
$
— $
— $
— $
— $
(604)
32
(8)
20
(560)
55
55
—
—
—
—
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] 16 Page
DTP SB Hcho 8.25 x 10.75 (35) .25 HT
Improving our productivity. And our prospects.
Transformed
Year-on-Year Adjusted EBITDA
our company to deliver key financial
growth.
In 2016, we delivered $822 million
Adjusted EBITDA* and retired $385
million in debt, strengthening our balance
sheet and improving our net leverage
position to ~3.3x.
Grew
market positions in Ti-Pure™, Opteon™,
and sodium cyanide.
#1
#1
#1
global producer of high-quality
titanium dioxide**
global producer
of fluoroproducts
sodium cyanide producer
in the Americas
Optimized
our portfolio through targeted
investments and strategic alternatives.
• Opteon™ low GWP product adoption has
exceeded expectations over the past
year as new applications have emerged.
$822
MILLION
43%
INCREASE
$573
MILLION
2015
2016
Refocused
$822
MILLION
investments by concentrating capital
spending on higher-value businesses.
• The Altamira plant expansion makes
INCREASE43%
it one of the lowest-cost and highest-
$573
MILLION
output TiO2 plants in the world.
• The Corpus Christi capacity expansion
will support growth of Opteon™, our
EBITDA
YEAR 1
refrigerant of the future.
TSR
YEAR 2
• Our sodium cyanide production capacity
is expected to increase 50% by the end
of 2018, with a projected 5% annual
growth over the next five years.
Simplified
317%
TSR
our processes with more rapid decision-
Chemours
outperformed
2015 fueled by
317 %
T S R
strong earnings in the second-,
third-, and fourth-quarters.
Reduced
structural costs by ~$200 million in
2016, with a cumulative reduction of
~$300 million since the spin-off.
Our future
beyond
transformation.
We remain committed to
driving long-term growth
by being a Higher Value
Chemistry company that
making and an unwavering focus on the
benefits shareholders,
• Concluded a comprehensive review
needs of our customers.
and restructure of our Chemical
Solutions portfolio, which resulted
in gross proceeds of ~$685 million.
Being customer centered has made us a
leaner, more competitive organization.
XX%
EBITDA
All of our brands stand for high reliability,
exceptional quality, and unparalleled
technical support—benefiting our
customers and making Chemours the
partner of choice.
*See reconciliation of Net Income to Adjusted EBITDA on page 60 of the Form 10-K.
**By production volume, as the most capable supplier with the broadest range of production flexibility.
customers, employees, and
society at large.
LEADERSHIP TEAM
Mark P. Vergnano
President &
Chief Executive Officer
Mark E. Newman
SVP & Chief Financial Officer
E. Bryan Snell
President, Titanium Technologies
Paul Kirsch
President, Fluoroproducts
Chris Siemer
President, Chemical Solutions
Beth Albright
SVP, Human Resources
Dave Shelton
SVP, General Counsel
& Corporate Secretary
Erich Parker
VP, Corporate Communications
& Chief Brand Officer
BOARD OF DIRECTORS
Back row (left to right)
Curtis J. Crawford
Director
Mary B. Cranston
Director
Front row (left to right)
Mark P. Vergnano
Director
Stephen D. Newlin
Director
Bradley J. Bell
Director
Richard H. Brown
Chairman of the Board
Curtis V. Anastasio
Director
Dawn L. Farrell
Director
Corporate Headquarters
The Chemours Company
1007 Market Street
P.O. Box 2047
Wilmington, Delaware 19899
1 302 773 1000
chemours.com
Stock Exchange Listing:
New York Stock Exchange
Stock Exchange Symbol: CC
Transfer Agent and Registrar of Stock:
Computershare Investor Services
P.O. Box 30170
College Station, Texas 77842
computershare.com/investor
Phone: US & Canada
1 866 478 8569
International: 1 781 575 2729
©2017 The Chemours Company. Chemours™ and the Chemours Logo are trademarks
of The Chemours Company.