LEADERSHIP TEAM
BOARD OF DIRECTORS
Mark P. Vergnano
President & Chief Executive Officer
Mark E. Newman
SVP & Chief Operating Officer
Sameer Ralhan
SVP, Chief Financial Officer
& Treasurer
Edwin Sparks
President, Fluoroproducts and
Chemical Solutions
E. Bryan Snell
President, Titanium Technologies
Susan Kelliher
SVP, People & Health Services
Dave Shelton
SVP, General Counsel
& Corporate Secretary
Erich Parker
SVP, Corporate Communications
& Chief Brand Officer
Curtis V. Anastasio
Director
Bradley J. Bell
Director
Richard H. Brown
Chairman of the Board
Mary B. Cranston
Director
Curtis J. Crawford
Director
Dawn L. Farrell
Director
Erin N. Kane
Director
Sean D. Keohane
Director
Mark P. Vergnano
Director
Corporate Headquarters:
The Chemours Company
1007 Market Street
P.O. Box 2047
Wilmington, Delaware 19801
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
Overnight Mail Delivery:
462 South 4th Street, Suite 1600
Louisville, Kentucky 40202
Regular Mail Delivery:
P.O. Box 505000
Louisville, Kentucky 40233-5000
computershare.com/investor
US & Canada: 1 866 478 8569
International: 1 781 575 2729
©2020 The Chemours Company. Chemours™ and the Chemours Logo are trademarks of The Chemours Company.
Tenacious
Determined
Committed
Motivated
Persistent
Resolute
Engrossed
Dedicated
Fixated
Rapt
Disciplined
Absorbed
Purposeful
Galvanized
Decisive
Centered
Driven
Dogged
Persistent
Focused.
THE CHEMOURS COMPANY
2019 ANNUAL REPORT
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2019
Chemours Stakeholders,
Focused. Disciplined. Relentless.
Five years into our journey, our young company is strengthening our leadership position in key markets, remaining relentlessly focused on creating
shareholder value. All the while, we are helping move our industry into a more environmentally and socially conscious future. Every day, across the globe,
our employees are resolute in their pursuit of growth opportunities and exceeding the expectations of our customers.
At the same time, we’ve faced our share of obstacles. Today, we are taking several steps to shape a future for Chemours where our product innovation
and a renewed level of focus and discipline across our company will power us to new heights.
In 2019, our company achieved net sales of $5.5 billion, adjusted* EBITDA of $1.02 billion, and adjusted* earnings per share of $2.51.
Weakening macro-economic conditions and some self-inflicted wounds affected our financial performance. We saw softness in two of our key end markets,
the automotive and electronics industries, which are particularly vulnerable to trade uncertainties. Our Titanium Technologies business lost greater market
share than anticipated early in 2019 with the simultaneous installation of new contract structures and our industry-first Ti-Pure™ Flex online portal, both key
elements of our Ti-Pure™ Value Stabilization Strategy. We also experienced costly production setbacks in our Fluoroproducts supply chain.
Despite these challenges, we achieved several milestones of note. We delivered record adjusted* EBITDA in our Chemical Solutions segment, we
captured double-digit sales volume growth of Opteon™ refrigerants in the automotive market, and we returned $486 million to shareholders via share
repurchases and dividends.
$5.5B
Net sales
$1.02B
$2.51
Adjusted*
EBITDA
Adjusted*
earnings per share
$486M
Returned to
shareholders
in 2019 via share repurchases and dividends
Here are some additional 2019 highlights:
Positioning Chemours for future growth . . .
• In Corpus Christi, Texas, we ramped up production at our new Opteon™
refrigerants plant, a $300 million facility that will triple our global
capacity of this valuable low global warming refrigerant. The Opteon™
products manufactured in Corpus Christi will allow us to capture addi-
tional opportunities, as the world transitions to the next generation of
more sustainable refrigerants.
• We acquired Southern Ionics Minerals, a responsible mining company
with assets in Georgia and Florida, increasing our company’s internal
supply of high-quality ilmenite ore used in the production of titanium
dioxide.
• Hundreds of our scientists moved into our new 312,000-square-foot,
state-of-the-art research facility, the Chemours Discovery Hub
(CDH), located on the University of Delaware’s STAR Campus. At the
CDH, our world-class scientists will harness chemistry to create the
next generation of Chemours ingredients and products that make a
positive difference in the world, including 5G communications
equipment, new energy vehicles, and wearable technologies.
• We launched several new products to serve our customers in
fast-growing markets, including Nafion™ NC700 ion-exchange
membranes for fuel cells and Ti-Pure™ TS-4567 pigment for
printing inks.
• In December, we simplified our product portfolio and
manufacturing footprint with the sale of our methylamines and
methylamides business in Belle, West Virginia.
Strengthening our key-market leadership positions . . .
• We captured increased adoption of Opteon™ refrigerants in
automotive and stationary air conditioning markets around the world,
including several high-profile customer wins. For instance, automotive
OEMs are expected to fully convert to HFOs in the United States by
2021 and Japan by 2023. We are also excited to announce Opteon™
is now the official refrigerant solution of the National Hockey League®
and is being used to cool the rink at the Pepsi Center, home of the
Colorado Avalanche®. Additionally, Chemours has significantly
stepped up its efforts to help European Union regulators crack
down on illegal imports of less sustainable HFCs from China into
Europe.
• We regained more stable relationships with titanium dioxide
customers as our contract terms and Ti-Pure™ Flex portal gained
acceptance, demonstrating market share recovery in the second half
of the year.
Trailblazing environmental and social responsibility for our
industry . . .
• In Fayetteville, North Carolina, we designed and installed a thermal
oxidizer that will eliminate 99.9% of our air emissions of
fluorinated compounds at this site. Our $100 million thermal oxidizer
was developed in-house by our sustainability and engineering teams,
and we believe this technology will become an industry-wide model for
emissions control at manufacturing sites around the world.
• We built on our Corporate Responsibility Commitments work,
including the ten ambitious goals we set for ourselves to achieve by
2030. We published our first data baselines against these ten goals,
which we’ll use to measure our progress in the future. We also expanded
our Future of Chemistry Scholarships program, and hundreds of our
employees volunteered around the world during our first Corporate
Responsibility Commitments day of community service.
These accomplishments notwithstanding, we are committed to taking
the lessons learned in 2019 to create a more disciplined company,
laser-focused on manufacturing excellence and commercial execution.
We will concentrate our efforts on strategically capturing opportunities
in fast-growing end-markets, striving for best-in-class reliability at
our plants, and continuing to streamline our product portfolio and
manufacturing footprint.
That, plus the tenacity and resilience—the grit—our workforce has
demonstrated from our start in 2015 and the trust and confidence of
our customers and investors will power Chemours to new heights.
Thank you for being with us on this exciting journey.
Best regards,
Richard H. Brown Mark P. Vergnano
Chairman of the Board
President & Chief Executive Officer
* See the definitions and reconciliations of all non–Generally Accepted Accounting Principles (GAAP) financial measures to their most directly comparable financial measures calculated and presented in accor-
dance with GAAP starting on page 57 of the Form 10-K. Forward-looking statements are subject to risk, uncertainties, and assumptions, all of which are described in our public filings.
10
Corporate Responsibility
Commitment Goals
By 2030, we aim to achieve the following:
Inspired People
Safety Excellence
• Improve employee, contractor, process, and distribution safety performance by
at least 75%.
Vibrant Communities
• Invest $50M in our communities to increase access to STEM skills and improve
lives through environment and safety programs.
Empowered Employees
• 50% of all positions globally filled with women.
• 20% of all US positions filled with ethnically diverse employees.
Shared Planet
Climate
• Reduce greenhouse gas emission intensity by 60%.
• Progress our plan to become carbon positive by 2050.
Water
• Reduce air and water process emissions of fluorinated organic chemicals by
99% or greater.
Waste
• Reduce landfill volume intensity by 70%.
Evolved Portfolio
Sustainable Offerings
• 50% or more of our revenues will be from solutions that make a specific
contribution to the 2030 United Nations Sustainable Development Goals.
Sustainable Supply Chain
• Baseline the sustainability performance of 80% of suppliers by spend and
demonstrate 15% improvement.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
☒
For the fiscal year ended December 31, 2019
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 001-36794
The Chemours Company
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or other Jurisdiction of Incorporation or Organization)
46-4845564
(I.R.S. Employer Identification No.)
1007 Market Street, Wilmington, Delaware 19801
(Address of Principal Executive Offices)
Registrant’s Telephone Number: (302) 773-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock ($.01 par value)
Trading Symbols(s)
CC
Name of Exchange on Which Registered
New York Stock Exchange
Securities are registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of 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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Yes ☒ No ☐
Yes ☐ No ☒
Yes ☒ No ☐
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Smaller reporting company ☐
Accelerated filer ☐
Emerging growth company ☐
Non-accelerated filer ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
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 28, 2019, the last business day of the registrant’s most recently
completed second fiscal quarter, was approximately $3.9 billion. As of February 10, 2020, 164,006,272 shares of the company’s common stock, $0.01 par
value, were outstanding.
Portions of the registrant’s definitive proxy statement relating to its 2020 annual meeting of shareholders (the “2020 Proxy Statement”) are incorporated by
reference into Part III of this Annual Report on Form 10-K where indicated. The 2020 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
The Chemours Company
TABLE OF CONTENTS
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Information About Our Executive Officers
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
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
Exhibits, Financial Statement Schedules
Form 10-K Summary
Part I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Item 15.
Item 16.
Signatures
Page
3
12
26
27
28
29
29
31
33
34
60
61
61
61
61
62
62
62
62
62
63
63
67
1
Forward-looking Statements
The Chemours Company
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 within 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 our control. Important factors that may materially affect such
forward-looking statements and projections include:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
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fluctuations in energy and raw materials pricing;
failure to develop and market new products and applications, and optimally manage product life cycles;
increased competition, and increasing consolidation of our core customers;
significant litigation and environmental matters, including indemnifications we were required to assume;
significant or unanticipated expenses, including, but not limited to, litigation or legal settlement expenses;
our ability to manage and complete capital projects and/or planned expansions, including the start-up of capital projects;
changes in relationships with our significant customers and suppliers;
failure to manage process safety and product stewardship issues appropriately;
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;
our current indebtedness and availability of borrowing facilities, including access to our revolving credit facilities;
business or supply disruptions and security threats, such as acts of sabotage, terrorism or war, weather events, and natural disasters;
uncertainty regarding the availability of additional financing in the future, and the terms of such financing;
negative rating agency actions;
changes in laws and regulations or political conditions;
our ability to protect, defend, and enforce our intellectual property rights;
our ability to predict, identify, and address changes in consumer preference and demand;
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 meet our growth expectations and outlook;
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. We assume 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,” “Chemours,” “the Company,” “our company,” “we,” “us,” and
“our” refer to The Chemours Company and its consolidated subsidiaries. References herein to “DuPont” refer to E. I. du Pont de Nemours and
Company, which is now a subsidiary of Corteva, Inc., a Delaware corporation, unless the context otherwise requires.
2
The Chemours Company
PART I
Item 1. BUSINESS
Overview
The Chemours Company (herein referred to as “us,” “we,” or “our”) 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 chemicals products
for markets, including plastics and coatings, refrigeration and air conditioning, general industrial, electronics, mining, and oil refining. Our principal
products include refrigerants, industrial fluoropolymer resins, sodium cyanide, performance chemicals and intermediates, and titanium dioxide
(“TiO2”) pigment. We manage and report our operating results through three reportable segments: Fluoroproducts, Chemical Solutions, and Titanium
Technologies. Our Fluoroproducts segment is a leading, global provider of fluoroproducts, including refrigerants and industrial fluoropolymer resins.
Our Chemical Solutions segment is a leading, North American provider of industrial chemicals used in gold production, industrial, and consumer
applications. Our Titanium Technologies segment is a leading, global provider of TiO2 pigment, a premium white pigment used to deliver whiteness,
brightness, opacity, and protection in a variety of applications.
We operate 30 major production facilities located in nine countries and serve approximately 3,700 customers across a wide range of end-markets in
over 120 countries.
We are committed to creating value for our customers and stakeholders through the reliable delivery of high-quality products and services around the
world. To achieve this goal, we have a global team dedicated to upholding our five values: (i) customer centricity – driving customer growth, and
our own, by understanding our customers’ needs and building long-lasting relationships with them; (ii) refreshing simplicity – cutting complexity by
investing in what matters, and getting results faster; (iii) collective entrepreneurship – empowering our employees to act like they own our
business, while embracing the power of inclusion and teamwork; (iv) safety obsession – living our steadfast belief that a safe workplace is a
profitable workplace; and, (v) unshakable integrity – doing what’s right for our customers, colleagues, and communities – always.
We also have a forward-looking Corporate Responsibility commitment, which focuses on three key principles – inspired people, a shared planet, and
an evolved portfolio – in an effort to achieve, among other goals, increased diversity and inclusion in our global workforce, increased sustainability of
our products, and becoming carbon positive. We call this responsible chemistry – it is rooted in who we are, and we expect that our Corporate
Responsibility commitment will drive sustainable, long-term earnings growth.
Many of our 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 December 31, 2019, no one individual
customer balance represented more than 5% of our total outstanding receivables balance, and no one individual customer represented more than
10% of our consolidated net sales.
Corporate History
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”). 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 us and DuPont following the Separation and provided for the allocation of various
assets, liabilities, rights, and obligations at the Separation Date. On August 31, 2017, DuPont completed a merger with The Dow Chemical Company
(“Dow”). Following their merger, DuPont and Dow engaged in a series of reorganization steps and, in 2019, separated into three publicly-traded
companies named Dow Inc., DuPont de Nemours, Inc., and Corteva, Inc. (“Corteva”). DuPont is now a subsidiary of Corteva, and, at this time, any
agreements related to our Separation remain between us and DuPont.
3
Segments
The Chemours Company
In our Fluoroproducts segment, we are a globally-integrated producer making both fluorochemicals and fluoropolymers. In our Fluorochemicals
business, there is increased adoption of Opteon™, one of the world’s lowest global warming potential (“GWP”) refrigerant brands, as governments
around the world pass legislation that makes the use of low GWP refrigerants a requirement. Our Fluoropolymers offerings provide customers with
tailored products that have unique properties, including very high temperature resistance, high chemical resistance, resistivity, and selective
permeability. We will continue to invest in research and development (“R&D”) to remain a leader in these areas and ensure that we are able to meet
our customers’ needs.
In our Chemical Solutions segment, our Mining Solutions and Performance Chemicals and Intermediates businesses produce industrial chemicals
used in various applications by our customers, which are primarily located in the Americas. As one of the largest North American producers of solid
sodium cyanide, our Mining Solutions business is recognized for its high quality product offering, reliability of supply, and commitment to the safe
production, storage, and use of our products. Global demand growth over the next three years is expected to remain healthy, driven by growth in
gold ore processing volumes. In our Mining Solutions business, particularly in the Americas region, the demand for sodium cyanide is expected to
exceed global demand growth rates. In our Performance Chemicals and Intermediates business, growth in demand for our products is expected to
generally grow in line with growth in global gross domestic product (“GDP”).
In our Titanium Technologies segment, we have a long-standing history of delivering high-quality TiO2 pigment using our proprietary chloride
technology. We are one of the largest global producers of TiO2 pigment, and our low-cost network of manufacturing facilities allows us to efficiently
and cost-effectively serve our global customer base. We believe we are well-positioned to remain one of the lowest-cost, high-quality TiO2 pigment
producers, and we will continue to meet our customers’ needs around the world.
We will maintain our commitment to responsible stewardship and safety for our employees, customers, and the communities in which 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 us as we continue to operate as a higher-value chemistry company.
Additional information on our segments can be found in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of
Operations and “Note 28 – Geographic and Segment Information” to the Consolidated Financial Statements.
Fluoroproducts Segment
Segment Overview
Our Fluoroproducts segment is a leading, global provider of fluorine-based, advanced materials solutions, such as refrigerants and industrial resins
and derivatives. 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 have an industry-leading safety culture and
apply world-class R&D and technical expertise to ensure that our operations run safely and reliably, and to improve our process technology. We sell
fluoroproducts through two primary product groups: Fluorochemicals and Fluoropolymers.
Fluorochemicals products include refrigerants, foam blowing agents, and propellants. We have held a leading position in the fluorochemicals market
since the commercial introduction of Freon™ in 1930. Since the original chlorofluorocarbons (“CFC”)-based product was introduced, we have been
at the forefront of new technology research for lower GWP and lesser ozone-depleting potential products, leading to the development of
hydrochlorofluorocarbons (“HCFC”) and hydrofluorocarbons (“HFC”). We have a leading position in HFC refrigerants under the brand name Freon™,
and we are a leader in the development of sustainable technologies like Opteon™, a line of low GWP hydrofluoroolefin (“HFO”) refrigerants, which
also have a zero ozone-depletion footprint. Opteon™ was initially developed in response to the European Union’s (“EU”) Mobile Air Conditioning
Directive. Today, our OpteonTM-branded portfolio of products are used in a broad range of applications, including automotive, air conditioning,
commercial refrigeration, and foam blowing agents. This patented technology offers similar functionality to current HFC products, but meets or
betters currently-mandated environmental standards and, in some cases, provides energy efficiency benefits.
We led the industry in the Montreal Protocol-driven transition in 1987 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 legislation being enacted across the U.S., Europe, Latin America, and Japan, we have commercialized Opteon™. Over
the years, regulations have pushed the industry to evolve and respond to environmental concerns. We will continue to invest in R&D to remain a
leader and meet our customers’ needs as regulations change.
4
The Chemours Company
Fluoropolymers products include various industrial resins, specialty products, and coatings. We serve a wide range of essential industrial and end-
user applications, including electronics, communications, automotive, wire and cable, energy, oil and gas, and aerospace, among others. Our
products’ unique properties include chemical inertness, thermal stability, non-stick adhesion, low friction, weather and corrosion resistance, extreme
temperature resistance, and unique di-electric properties. Our Fluoropolymers products are sold under the brand names Teflon™, Viton™, Krytox™,
and Nafion™. Teflon™ coatings, resins, additives, and films are 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. Under the brand name Nafion™, we sell membranes, which are used in fuel cells, energy flow
battery storage, transportation, stationary power, and medical tubing.
Industry Overview and Competitors
Our Fluoroproducts segment competes against a broad variety of global manufacturers, 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 applications
development, and deep customer knowledge. Key competitors in Fluorochemicals include: Honeywell International, Inc., Arkema S.A., Orbia,
Dongyue Group Co., Ltd. (“Dongyue”), and Juhua Group Corporation. Key competitors in Fluoropolymers include: Daikin Industries, Ltd., 3M
Company, Solvay, S.A., Asahi Glass Co., Ltd., Dongyue, and Chenguang Group.
Fluoroproducts demand growth is generally in line with global GDP growth. Within Fluorochemicals, growth may be higher than GDP in situations
where, for environmental reasons, regulatory drivers constrain the market or drive the market toward lower GWP alternatives. In Fluoropolymers,
overall market growth is expected to be in line with GDP over the next few years, but may be influenced by increased competition and pricing
pressure in some businesses. There are certain emerging technologies, such as 5G, along with our focus on application development, that may drive
our growth at a rate faster than GDP. Developed markets represent the largest consumers of fluoroproducts today. Global middle class growth and
the increasing demand for expanding infrastructure, alternative energy, consumer electronics, telecommunications, automobiles, refrigeration, and
air conditioning 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 are not concentrated in any particular region. We pursue maximum
competitiveness in our global supply chains through favorable sourcing of key raw materials. Our contracts typically include terms that span from two
to 10 years, except for select resale purchases that are negotiated on a monthly basis. Qualified fluorspar sources have fixed contract prices or
freely-negotiated, market-based pricing. We diversify our 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, the 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
The Fluoroproducts segment serves approximately 2,800 customers and distributors globally and, in many instances, these commercial relationships
have been in place for decades. No single Fluoroproducts customer represented more than 10% of the segment’s net sales in 2019.
5
Seasonality
The Chemours Company
Fluorochemicals’ refrigerant sales fluctuate by season, as sales in the first half of the year are generally higher than sales in the second half of the
year due to increased demand for residential, commercial, and automotive air conditioning in the spring, which peaks in the summer months, and
then declines in the fall and winter in the northern hemisphere. Mobile air conditioning demand is slightly higher in the first half of the year due to
the timing of automotive production shutdowns in the second half of the year. There is no significant seasonality for Fluoropolymers, as demand
is relatively consistent throughout the year.
Chemical Solutions Segment
Segment Overview
Our Chemical Solutions segment is comprised of a portfolio of industrial chemical businesses, primarily operating in the Americas. The 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. Chemical Solutions generates value through the use of market-leading manufacturing technology,
safety performance, product stewardship, and differentiated logistics capabilities.
The Chemical Solutions segment has operations at three production facilities in North America, which sell products and solutions through two
primary product groups: Mining Solutions and Performance Chemicals and Intermediates. The Mining Solutions product group includes our sodium
cyanide and hydrogen cyanide product lines. We are a market leader in solid sodium cyanide production in the Americas, which is used primarily by
the mining industry for gold and silver production. We are also investing in a new sodium cyanide production facility in Mexico, for which construction
is currently suspended as discussed further in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements. For our
Mining Solutions product group, we expect global demand growth to remain healthy over the next few years. In the Performance Chemicals and
Intermediates product group, we manufacture a wide variety of chemicals used in many different applications. Performance Chemicals and
Intermediates is now primarily comprised of our Glycolic Acid, Vazo™, and Aniline product lines, following our exit of the Methylamines and
Methylamides business at our Belle, West Virginia production facility. Our plans to exit the business were announced in the third quarter of 2019,
culminating in our completed exit and sale of the business to Belle Chemical Company, a subsidiary of Cornerstone Chemical Company, in the
fourth quarter of 2019. Our remaining Performance Chemicals and Intermediates business is expected to generally grow in line with growth in global
GDP.
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 sodium cyanide, Aniline, and
Vazo™. Our 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 holds what we believe to be leading process technologies for the production of hydrogen and sodium
cyanide, which are used in industrial polymers and gold production. The segment occasionally licenses these process technologies, as well as its
process technology for the production of acrylonitrile. Key competitors for the Chemicals Solutions segment include Cyanco Corp., Hebei Chengxin
Group Co. Ltd., CyPlus GmbH, Orica Ltd., and Tongsuh Petrochemical Corp., Ltd.
Raw Materials
Key raw materials for our Chemical Solutions segment 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 materials availability and cost fluctuations, our Chemical Solutions segment 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
materials 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.
6
The Chemours Company
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, the 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 are key competitive advantages, as several of the products’ end-
users demand the highest level of excellence in safe manufacturing, distribution, handling, and storage. Our Chemical Solutions segment has U.S.
Department of Transportation Special Permits and Approvals in place for the distribution of various materials associated with each of our business
lines, as required. Our Chemical Solutions segment serves approximately 500 customers globally. No single Chemical Solutions customer
represented more than 10% of the segment’s net sales in 2019.
Seasonality
Our Chemical Solutions segment’s sales are subject to minimal seasonality.
Titanium Technologies Segment
Segment Overview
Our Titanium Technologies segment is a leading, global manufacturer of high-quality TiO2 pigment. TiO2 pigment is used to deliver whiteness,
brightness, opacity, and ultra-violet light protection in applications such as architectural and industrial coatings, flexible and rigid plastic packaging,
polyvinylchloride (“PVC”), laminate papers used for furniture and building materials, coated paper, and coated paperboard used for packaging. We
sell our TiO2 pigment under the Ti-Pure™ brand name. We also sell a chloride-based TiO2 pigment under the BaiMaxTM brand name, which is
exclusively produced for customers in Greater China. We operate four TiO2 pigment production facilities: two in the U.S., one in Mexico, and one in
Taiwan. In addition, we have a large-scale repackaging and distribution facility in Belgium. We also operate mineral sands mining and separation
operations in Starke, Florida, as well as mineral sands mining operations in Folkston, Georgia and mineral sands separation operations in Offerman,
Georgia. In total, we have a TiO2 pigment nameplate capacity of approximately 1.25 million metric tons per year.
We are one of a limited number of manufacturers operating a chloride process for the production of TiO2 pigment. We believe that our proprietary
chloride technology enables us to operate plants at a much higher capacity than other chloride technology-based TiO2 pigment producers, as we
uniquely utilize a broad spectrum of titanium-bearing ore feedstocks to achieve one of the highest TiO2 pigment 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 R&D
efforts focus on improving production processes and developing TiO2 pigment grades that help our customers achieve optimal cost and product
performance to enhance end-user total value.
We sell over 20 different grades of TiO2 pigment, with each grade tailored for targeted applications. Our portfolio of premium performance TiO2
pigment grades provides 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. Additionally, in 2019, we acquired a titanium mine in Folkston, Georgia, from which
we source ore feedstock to be processed at its associated mineral sands separation facility in Offerman, Georgia. The recently added mine and
separation facility were attained in the third quarter of 2019 as part of our acquisition of Southern Ionics Minerals, LLC (“SIM”), which expands our
flexibility and scalability to internally source ore. These mines provide us with access to low-cost sources of domestic, high-quality ilmenite ore
feedstock and supply less than 10% of our ore feedstock consumption needs, with expansion options that could effectively double our in-sourced
material base. Co-products of our mining operations, which comprised less than 5% of our total net sales in Titanium Technologies during 2019, 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 industry, foundry, specialty applications, and ceramics. Our staurolite blasting abrasives are used in a variety of surface
preparation applications, including steel preparation and maintenance and paint removal.
7
Industry Overview and Competitors
The Chemours Company
The overall demand for TiO2 pigment is highly correlated to growth in the global residential housing, commercial construction, and packaging
markets. In the long-run, industry demand for TiO2 pigment is generally expected to grow proportionately with GDP growth. We continue to
experience customers’ preference for high-quality Ti-PureTM offerings. After 2016 and 2017 demand in the TiO2 pigment market above GDP growth,
the TiO2 pigment market contracted below the GDP trend in 2018 and 2019. In the longer-term, we expect global TiO2 pigment demand to resume its
historical correlation with global GDP growth rates.
We estimate that the worldwide demand for TiO2 pigment in 2019 was approximately 6.1 million metric tons, of which approximately 60% was for
premium performance pigments. Worldwide nameplate capacity in 2019 was estimated to be approximately 8.0 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.
Over the next few years, as customer demand grows, we will be able to incrementally increase our production capacity by approximately 10%
through technology-enabled de-bottlenecking processes. We believe that unlocking this additional 10% of capacity is in line with the anticipated
needs of our customers during this time. This new capacity is expected to provide the equivalent of a new production line, while requiring a fraction
of the capital investment. Our increased production capacity will be supported by investments to extend our ilmenite mines and through long-term
contracts with our suppliers.
Competition in the TiO2 pigment market is based primarily on product performance (both product design and quality consistency), supply capability,
price, and technical service. Our major competitors within higher-performance pigments include: Tronox Holdings plc, Venator Materials plc, Kronos
Worldwide, Inc., and INEOS AG. Beyond multi-national suppliers, the only other large producer of TiO2 pigment is the Chinese producer, the Lomon-
Billions Group. The other TiO2 pigment producers are fragmented, mostly utilizing the sulfate production process, and competing in the general
purpose, lower-performance pigment market. Over the next few years, we believe that the announced added effective capacity in China is expected
to be somewhat offset by capacity shutdowns at marginal producers.
Raw Materials
The primary raw materials used in the manufacture of TiO2 pigment 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. 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 cost. We typically enter into a combination of long-term and medium-term supply
contracts and source our raw materials 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 us, 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 low-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.
Transporting chlorine, one of our primary raw materials, can be costly. To reduce 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 materials and logistics planning through the supply chain. Distribution efficiency is enhanced through the use of bulk
ocean, barge, and rail transportation modes. Energy is another key input cost in the TiO2 pigment manufacturing process, representing
approximately 10% of the production cost. We have access to natural gas-based energy at our U.S. and Mexico TiO2 pigment production facilities
and our Florida and Georgia minerals plants, supporting advantaged energy costs given the low cost of shale gas in the U.S.
8
Sales, Marketing, and Distribution
The Chemours Company
We sell the majority of our products through a direct sales force. In 2018, we launched our Ti-Pure™ Value Stabilization (“TVS”) strategy, which we
believe to be foundational to maintain and grow our Titanium Technologies business. Our TVS strategy establishes a commercial framework that
allows us to focus on enhancing durable, value-oriented customer relationships, while providing access to a predictable and reliable supply of high-
quality TiO2. Customers can purchase Ti-PureTM TiO2 through our Chemours Assured Value Agreements (“AVA”). As an alternative, in 2019, we
launched a new, innovative channel, Ti-PureTM Flex, which provides customers the unique ability to purchase Ti-Pure™ TiO2 via our web-based
portal, the first of its kind in the industry. To further expand our reach beyond these sales channels, we also utilize third-party sales agents and
distributors.
TiO2 pigment represents a significant raw material cost for our direct customers, and as a result, purchasing decisions are often made by our
customers’ senior management teams. TiO2 pigment, however, is only a small fraction of the cost when considering certain end-use applications,
especially in segments with larger value chain players, such as specialty coatings, plastics, and laminates applications. Our sales organization works
to develop and maintain close relationships with key decision-makers in our value chain. In addition to close purchasing relationships, 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 approximately 600 customers through our Titanium Technologies segment. In 2019, our 10 largest Titanium Technologies
customers accounted for approximately 40% of the segment’s net sales, and one Titanium Technologies customer represented more than 10% of
the segment’s net sales. Our larger customers are typically served through direct sales and tend to have medium-term to long-term contracts. We
serve our small-size and mid-size customers through a combination of our direct sales and distribution network. Our direct customers in the Titanium
Technologies segment are producers of decorative coatings, automotive and industrial coatings, polyolefin masterbatches, PVC, 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.
Seasonality
The demand for TiO2 pigment 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 pigment 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 pigment market, but may vary by region, country, or application. It
can also be altered by economic or other demand cycles.
9
Intellectual Property
The Chemours Company
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 applications development technologies. We hold many patents, particularly in our Fluoroproducts segment, as
described herein. These patents, including various patents that will expire in varying years into the 2030s, 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. 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 the Chemical Solutions segment, as most of the
segment’s manufacturing and applications development technologies are no longer under patent coverage. 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 that our trade secrets are material in the aggregate. Unlike patents, trade
secrets do not have a pre-determined 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 our success, 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 can be a source of incremental income
through licensing arrangements.
Our Fluoroproducts segment is a 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 segment’s intellectual property portfolio, we consider our Freon™, Opteon™, Teflon™, Viton™, NafionTM,
and Krytox™ trademarks to be valuable assets. Our Titanium Technologies segment in particular relies upon unpatented proprietary knowledge,
continuing technological innovation, and other trade secrets to develop and maintain our competitive position in this sector. 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 segment’s intellectual property portfolio, we consider our trademarks Ti-Pure™ and BaiMaxTM to be valuable assets and
have registered the Ti-PureTM trademark in a number of countries and the BaiMaxTM trademark in China.
At the Separation, certain of our subsidiaries entered into an intellectual property cross-license agreement with DuPont, pursuant to which (i) DuPont
licenses to us certain patents, know-how, and technical information owned by DuPont or its affiliates which are necessary or useful in our business,
and (ii) we license to DuPont certain patents owned by us or our affiliates which are necessary or useful in DuPont’s business. In most
circumstances, the licenses are perpetual, irrevocable, sub-licensable (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 operations of
the businesses and, with respect to specified products and fields of use, future operations of such businesses, subject to certain limitations with
respect to specified products and fields of use.
Backlog
In general, we do not manufacture our products against a backlog of orders and do not consider backlog to be a significant indicator of the level of
our future sales activity. Our production and inventory levels are based on the level of incoming orders, as well as projections of future demand.
Therefore, we believe that backlog information is not material to understanding our overall business and should not be considered a reliable indicator
of our ability to achieve any particular level of net sales or financial performance.
Environmental Matters
Information related to environmental matters is included in several areas of this Annual Report on Form 10-K, including: (i) Item 1A – Risk Factors;
(ii) Item 3 – Legal Proceedings, under the heading “Environmental Proceedings”; (iii) Item 7 – Management’s Discussion and Analysis of Financial
Condition and Results of Operations; and, (iv) “Note 3 – Summary of Significant Accounting Policies” and “Note 22 – Commitments and Contingent
Liabilities” to the Consolidated Financial Statements.
10
Available Information
The Chemours Company
We are subject to the reporting requirements under the Securities Exchange Act of 1934 (the “Exchange Act”). Consequently, we are required to file
reports and information with the U.S. Securities and Exchange Commission (“SEC”), including reports on the following forms: Annual Reports 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 Exchange Act.
Our Annual Reports 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 our website at http://www.chemours.com by clicking on the section labeled “Investor Relations,” then on “Financials” and “SEC
Filings.” These reports are made available, without charge, as soon as it is reasonably practicable after we file or furnish them electronically with the
SEC at http://www.sec.gov.
Employees
We have approximately 7,000 employees, approximately 14% of whom are represented by unions or works councils. Management believes that its
relations with employees and labor organizations are good.
11
Item 1A. RISK FACTORS
The Chemours Company
Our 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 our
“Forward-looking Statements” for more details.
Risks Related to Our Business
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, investigations and litigation matters, such as product liability claims, patent
infringement claims, 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. We have noted a nationwide trend in purported mass tort and 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 and damages to natural resources. Various factors or developments in these nationwide trends or in the actions 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/or stock price, and could adversely impact the value of any of our brands that are associated with any such matters. As
discussed below, we are a named defendant and/or indemnifying and defending DuPont in litigation related to the production and use of
perfluorooctanoic acids and its salts, including the ammonium salt (“PFOA”); hexafluoropropylene oxide dimer acid (“HFPO Dimer Acid,” sometimes
referred to as “GenX” or “C3 Dimer Acid”); Aqueous Film Forming Foam (“AFFF”); perfluorinated and polyfluorinated compounds (“PFAS”); and other
compounds.
We have received inquiries, government investigations, directives, multiple lawsuits, and other actions related to PFOA, GenX, AFFF, and PFAS as
discussed in more detail in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements. These or other
governmental inquiries or lawsuits could lead to our incurring liability for damages or other costs, a criminal or civil proceeding, the imposition of fines
and penalties, and/or other remedies, as well as restrictions on or added costs for our business operations going forward, including in the form of
restrictions on discharges at our Fayetteville Works site in Fayetteville, North Carolina (“Fayetteville”) or otherwise. Additional lawsuits or inquiries
also could be instituted related to these or other compounds in the future. Accordingly, the existing lawsuits and inquiries, and any such additional
litigation, relating to our existing operations, PFOA, HFPO Dimer Acid, AFFF, PFAS and other perfluorinated and polyfluorinated compounds, or
other compounds associated with our products or operations, could result in us incurring additional costs and liabilities, which may be material to our
financial results.
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 may be 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 Separation. These
indemnification obligations to date have included defense costs associated with certain litigation matters as well as certain damages awards,
settlements, and penalties. On August 24, 2017, we and DuPont entered into an amendment to the separation agreement concerning future PFOA
litigation and costs not covered by the MDL Settlement as detailed in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated
Financial Statements. Future PFOA-related costs and settlements 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 with DuPont and others which may arise with respect
to indemnification matters including disputes based on matters of law or contract interpretation, could materially adversely affect us.
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The Chemours Company
We are subject to extensive environmental and health and safety laws and regulations that may result in unanticipated loss or liability
related to our current and past operations, and that may result in significant additional compliance costs or obligations, which in either
case, could reduce our profitability.
Our operations and production facilities are dependent upon attainment and renewal of requisite operating permits and are subject to extensive
environmental and health and safety laws, regulations, and enforcements at national, international, and local levels in numerous jurisdictions relating
to pollution, protection of the environment, climate change, transporting and storing raw materials and finished products, storing and disposing of
hazardous wastes, and product content and other safety concerns. Such laws include, but are not limited to:
•
•
•
•
U.S.-based regulations, 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 and global laws for management and
remediation of hazardous materials, the Clean Air Act (“CAA”) and Clean Water Act (“CWA”) and similar state and global laws for the
protection of air and water resources, and the Toxic Substances Control Act (“TSCA”);
Foreign-based chemical control regulations, such as the Registration, Evaluation, Authorization, and Restriction of Chemicals (“REACH”)
in the EU, the Chemical Substances Control Law (“CSCL”) in Japan, MEP Order No. 7 in China, and the Toxic Chemical Substance
Control Act (“TCSCA”) in Taiwan for the production and distribution of chemicals in commerce and reporting of potential adverse effects;
The EU Emissions Trading System and similar local and global laws for regulating greenhouse gas (“GHG”) emissions; and,
Numerous local, state, federal, and foreign laws, regulations, and enforcements governing materials transport and packaging.
If we are found to be in violation of these laws, regulations, or enforcements, 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 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. Any operational interruptions or plant
shutdowns may result in delays in production, or may cause us to incur additional costs to develop redundancies in order to avoid interruptions in our
production cycles. In addition, the manner in which adopted regulations (including environmental and safety 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.
Our costs of complying with complex environmental laws, regulations, and enforcements, as well as internal voluntary programs, are significant and
will continue to be significant for the foreseeable future. These laws, regulations, and enforcements may change and could become more stringent
over time, which could result in significant additional compliance costs, increased costs of purchased energy or other raw materials, investments in,
or restrictions on, our operations, or installation or modification of GHG emitting equipment. As a result of our current and historic operations,
including the operations of divested businesses and certain discontinued operations, we also expect to continue to incur costs 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 U.S.
generally accepted accounting principles (“GAAP”), 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 of Financial Condition and Results of Operations
and “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements for further information. We also could incur
significant additional costs as a result of additional contamination that is discovered or remedial obligations imposed in the future.
There is also a risk that one or more of our manufacturing processes, key raw materials, or products may be found to have, or be characterized or
perceived 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 our 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
as a result of litigation. In addition, the relevant materials or products, including products of our customers incorporating our materials or products,
may be recalled, phased-out, 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.
13
The Chemours Company
For example, in May 2016, the European Chemicals Agency (“ECHA”) accepted a proposal from France’s competent authority under REACH to
change the classification of TiO2. ECHA’s Committee for Risk Action (“RAC”) provided the opinion that the evidence meets the criteria under the
EU’s Classification, Labeling and Packaging (“CLP”) Regulation to classify TiO2 as a Category 2 Carcinogen (suspected human carcinogen) by
inhalation. To implement this opinion, the EU Commission (“EC”) presented a draft of the full 14th Adaptation to Technical Progress (“ATP”), including
a proposed classification (with notes) for the powder form of TiO2 as a Category 2 Carcinogen by inhalation, as a delegated act for scrutiny by EU
Council and Parliament. The scrutiny period ended in February 2020, with publication to follow shortly thereafter. Publication will then be followed by
an 18-month implementation period before the act comes into enforcement. Upon publication of the act and our subsequent review of the additional
regulatory measures enacted, we may be subject to increased requirements for TiO2 product labeling, importing operations, and certain downstream
use applications associated with TiO2. This could increase our costs associated with our TiO2 manufacturing and handling processes.
In June 2019, the Member States Committee of ECHA also voted to list HFPO Dimer Acid as a Substance of Very High Concern. The vote was
based on Article 57(f) – equivalent level of concern having probable serious effects to the environment. This identification does not impose
immediate regulatory restriction or obligations, but may lead to a future authorization or restriction of the substance, which could have an adverse
effect on our results of operations, financial condition, and cash flows. In September 2019, Chemours filed an application with the EU Court of
Justice for the annulment of the decision of ECHA to list HFPO Dimer Acid as a Substance of Very High Concern.
The businesses in which we compete are highly competitive. 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.
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. Some of our
competitors have announced plans to expand their chloride capacity. Additionally, our Titanium Technologies business competes with numerous
regional producers, including producers in China, who have expanded their readily-available production capacity during the previous five years. The
risk of substitution of these Chinese producers by our customers could increase as these Chinese producers expand their use of chloride production
technology. Similarly, we compete with various producers in our Fluoroproducts business, and the risk of substitution of these producers by our
customers could increase if these producers develop better capabilities to manufacture products similar to our specialty fluoropolymers.
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 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.
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The Chemours Company
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, 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 changes and product improvements, as
well as changes in mandates on or regulation of products and services. Our future growth will depend on our ability to gauge the direction of
commercial and technological progress in key end-use markets, our ability to fund and successfully develop, manufacture, and market products in
such changing end-use markets, and our ability to adapt to changing regulations. 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 technologies, 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, customer behaviors and demands, competitive environments, and laws, regulations, or enforcements. 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, regulations, or enforcements if the implementation of such laws, regulations, or enforcements is delayed, and
we may face competition from illegal or counterfeit products in regulated markets.
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, power outages, and/or information technology system and network disruptions, regardless
of cause, including acts of sabotage, employee error or other actions, geo-political activity, military actions, and terrorism (including cyberterrorism)
could seriously harm our operations, as well as the operations of our customers and suppliers. Further, the nature of our business dictates that we
maintain significant concentrations of physical assets in certain geographical locations, some of which may be prone to weather-related events and
natural disasters (which could be exacerbated by climate change). Such events could also seriously harm our operations, as well as the operations
of our customers and suppliers, and accordingly, we continue to study the long-term implications of changing climate parameters on plant siting,
operational issues, and water availability. Any of the aforementioned disruptions and/or events could have a negative impact on our business, results
of operations, financial condition, and cash flows.
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 other 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 cyberattacks, 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 pigment 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.
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The Chemours Company
Our information technology is provided by a combination of internal and external services and service providers, and we rely on information
technology in many aspects of our business, including internal and external communications, and the management of our accounting, finance, and
supply chain functions. Further, our business involves the use, storage, and transmission of information about customers, suppliers, and employees.
As we become more dependent on information technology to conduct our business, and as the number and sophistication of cyberattacks increases,
the risks associated with cybersecurity, information security, and data privacy also increase. Failure to maintain effective internal control over our
information technology and infrastructure could materially adversely affect our business, financial condition, or results of operations, and/or have a
material adverse impact on our stock price.
Preparedness plans pertaining to the physical- and cyber-related aspects of our business have been developed and detail the actions needed in the
event of unforeseen events or severe weather. These measures have historically been in place, and such activities and associated costs are driven
by normal operational preparedness. However, there can be no assurance that such measures will be effective for a particular event that we may
experience.
Our ability to make future strategic decisions regarding our manufacturing operations are subject to regulatory, environmental, political,
legal, and economic risks, and to a 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 facilities. Construction of additions or modifications to
facilities involves numerous regulatory, environmental, political, legal, and economic uncertainties that are beyond our control, and are subject to
various start-up risks and consent to operate. Difficulties in obtaining any of the requisite licenses, permits, and authorizations from governmental or
regulatory authorities could increase the total cost, delay, jeopardize, or prevent the construction or opening of such facilities. Our 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, which may adversely affect
our results of operations, financial condition, and cash flows. Moreover, our revenue may not increase immediately upon the expenditure of funds on
a particular project or may be negatively impacted by regulatory or other developments relating to the chemicals we use or manufacture. As a result,
we may not be able to realize our expected investment return, which could also adversely affect our results of operations, financial condition, and
cash flows.
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 make these strategic decisions regarding our 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.
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 sheets. Under 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
industrial, economic, political, and social landscapes in which we operate, as well as competition or other factors leading to a reduction in expected
long-term sales or profitability. We may be required to record a significant non-cash 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 March 2018, a civil association in Mexico filed a complaint against the government authorities involved in the permitting process of our new Mining
Solutions facility under construction in Gomez Palacio, Durango, Mexico. The claimant sought and obtained a suspension from the district judge to
stop our construction work. The suspension was subsequently lifted on appeal, and the matter is before the Supreme Court of Mexico. A second
similar complaint was filed in September 2019 and, again, a suspension of construction was granted. We have filed an appeal. In the event that the
suspension of construction is ultimately upheld, we would incur $26 million of contract termination fees with a third-party services provider.
Additionally, at December 31, 2019, we had $144 million long-lived assets under construction at the facility, $7 million of other related prepaid costs,
and $51 million of our goodwill assigned to the Mining Solutions reporting unit. While we currently believe these amounts are recoverable, any future
assessment that could potentially deem the facility to be impaired would result in a non-cash charge that negatively impacts our results of operations.
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The Chemours Company
Our operations could be materially impacted in the event of a failure of our information technology infrastructure.
We currently use an enterprise resource planning (“ERP”) software platform that is no longer supported; however, we are able to pay for extended,
customer-specific support, which can be costly. We are currently evaluating our options to upgrade or switch this platform. Any systems failure,
accident, or security breach could result in significant costs or disruptions to our operations, which could have a material adverse effect on our
business. Further, such improvements and upgrades are often complex, costly, and time-consuming. We may experience challenges integrating any
new ERP software platform with our existing technology systems, or may uncover problems with our existing technology systems. Any unsuccessful
attempt to upgrade or switch our ERP software platform could result in outages, a disruption to our operations and our ability to serve our customers,
and/or damage to our reputation.
Hazards associated with chemical manufacturing, storage, containment, and transportation could adversely affect our results of
operations.
There are hazards associated with chemical manufacturing and the related storage, containment, 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 unforeseen accidents or defects, natural disasters, severe weather events, acts of sabotage,
military actions, terrorism, 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, contamination of the environment, and damage to natural resources,
which could lead to government fines and penalties, remedial obligations, 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 flows
to offset any associated costs. Such outcomes could adversely affect our financial condition and results of operations.
Our success depends on our ability to attract and retain key employees, and to identify and develop talented personnel to succeed our
senior management and other employees.
Our success depends on the performance of our senior management team and other key employees. If we are unable to attract, retain, identify, and
develop such individuals, whether due to technical, geographical, social, or other misalignment, our results of operations, financial condition, and
cash flows could be adversely affected. Further, if we are unable to effectively plan for the succession of our senior management team, our results of
operations, financial condition, and cash flows could be adversely affected, as we may be unable to realize our business strategy. While our ongoing
personnel practices identify a succession process for our key employees, including our senior management team, we cannot guarantee the
effectiveness of this process, the continuity of highly-qualified individuals serving in all of our key positions at particular moments in time, and/or the
completeness of any knowledge transfer at the time of succession.
In addition, we expect to experience significant turnover at an operations level due to the demographics of our general workforce. Accordingly, we
cannot guarantee the completeness of any knowledge transfer at the time of departure, or the continuity of key processes and/or internal controls
over our financial reporting and disclosure controls and procedures.
Operating as a multi-national corporation presents risks associated with global and regional economic downturns and global capital
market conditions as well as risks resulting from changes to regional regulatory requirements (including environmental standards).
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
tariffs on international trade and a changing financial regulatory environment that could affect the global economy. Such global economic conditions
may be further affected by physical risks that stem from a number of root causes, including natural disasters and/or travel-based restrictions that may
be driven by geo-political activities, military actions, terrorism, and the spread of pandemics, such as the novel coronavirus.
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The Chemours Company
Our customers may experience deterioration of their businesses, shortages in cash flows, 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 our international sales, purchases,
investments, and borrowings. Also, our effective tax rate may fluctuate because of variability in our geographic mix of earnings, changes in statutory
rates, and taxes associated with the repatriation of our 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.
In addition to the general risks associated with operating in the global economy, our revenue and profitability are largely dependent on the TiO2
pigment industry and the industries that are the end-users of our fluoroproducts. TiO2 pigment 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, which may or may not impact all of
our businesses at the same time or to the same degree, are likely to cause a decrease in the 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 future Ti-PureTM demand growth may be below average
global GDP growth rates if our sales into developed markets outpace our sales into emerging markets. In addition, because demand for our
fluorochemicals is driven in part by industry needs to comply with certain mandated environmental regulations (such as markets for refrigerants and
foams with low GWP), changes in, the elimination of, or lack of enforcement of such environmental regulations in the U.S., the EU, or other
jurisdictions can also negatively impact demand for such products and, as a result, our results of operations and financial condition.
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, the Mexican peso, the Chinese
yuan, and the 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 sales 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, depreciation of the euro against the U.S. dollar has historically negatively impacted our results of operations, and further
decline of the euro could affect future periods.
We enter into certain of our qualifying foreign currency forward contracts under a cash flow hedge program to mitigate the risks associated with
fluctuations in the euro against the U.S. dollar for forecasted U.S. dollar-denominated inventory purchases for certain of our international
subsidiaries. There can be no assurance that any hedging action 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 our Titanium Technologies segment, a substantial portion of our manufacturing is located in the U.S. and Mexico, while our TiO2 pigment 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 some of our competitors who
operate largely outside of the U.S., and the benefits we realize from having lower costs associated with our manufacturing process are reduced,
impacting our profitability.
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 may be subject to worldwide supply and
demand factors, global trade regulations and tariffs, GHG emissions-based regulations, and 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-term 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 profitability and cash flows from operations. However, to the extent that the prices of the 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.
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The Chemours Company
We attempt to offset the effects of higher energy and raw materials 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 materials costs, there could be a material adverse effect on our
financial results.
In connection with our Separation, we were required to assume, and indemnify DuPont for, certain liabilities. As we may be 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 Separation, 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 in “Note 22 – Commitments and Contingent
Liabilities” to the Consolidated Financial Statements, we and DuPont entered into an amendment to the separation agreement concerning PFOA
costs, the terms of which are also described in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements.
Payments pursuant to these indemnities, whether relating to PFOA costs or otherwise, 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 with DuPont and others which may arise with respect to indemnification matters, including disputes based on matter of law or contract
interpretation, could materially adversely affect us. As described in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial
Statements, we have filed a lawsuit against DuPont regarding indemnification matters. As further described in “Note 22 – Commitments and
Contingent Liabilities” to the Consolidated Financial Statements, multiple lawsuits have been filed by third parties containing allegations that
DuPont’s separation of Chemours was fraudulent.
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 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements for further
information.
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 us.
Commercial agreements we entered into with DuPont prior to the Separation were formed 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 formed, 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 changed 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 us and
DuPont.
Our customers, prospective customers, suppliers, other companies with whom we conduct business, or regulators may need assurances
that our financial stability is sufficient to satisfy their respective business or regulatory requirements.
Some of our customers, prospective customers, suppliers, other companies with whom we conduct business, or regulators may need assurances
that our financial stability is sufficient to satisfy their respective business or regulatory requirements, 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.
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The Chemours Company
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 flows and our ability to meet our
obligations or make cash distributions depends upon the cash flows 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, as described in “Note 20 – Debt” to the
Consolidated Financial Statements. Because a significant portion of our operations are conducted by non-guarantor subsidiaries, our cash flows 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 non-guarantor subsidiaries. Any payment of
dividends, distributions, loans, or advances by our non-guarantor 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 non-guarantor 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 the outstanding 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.
Our failure to comply with the anti-corruption laws of the U.S. and various international jurisdictions could 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 (“FCPA”), the U.K. Bribery Act 2010 (“Bribery Act”), as well as other 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 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, 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.
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The Chemours Company
We could be subject to changes in our tax rates and the adoption of tax legislation or exposure to additional tax liabilities that may
adversely affect our results of operations, financial condition, and cash flows.
We are subject to taxes in the U.S. and non-U.S. jurisdictions where our subsidiaries are organized. Due to economic and political conditions, tax
rates in various jurisdictions may be subject to significant change. Our future effective tax rates could be affected by changes in the mix of earnings
in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, and changes in tax laws or their
interpretations. Our tax returns and other tax matters are subject to examination by local tax authorities and governmental bodies. We regularly
assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of our provision for taxes. There can be
no assurance as to the outcome of these examinations. If our effective tax rates were to increase, or if the ultimate determination of the taxes owed
by us is for an amount in excess of amounts previously accrued, our operating results, financial condition, and cash flows could be adversely
affected.
Failure to meet some or all of our key financial and non-financial targets could negatively impact the value of our business and adversely
affect our stock price.
From time to time, we may announce certain key financial and non-financial targets that are expected to serve as benchmarks for our performance
for a given time period, including goals for our future net sales growth, adjusted earnings before interest, taxes, depreciation, and amortization,
adjusted earnings per share, free cash flows, return on invested capital, corporate responsibility, and/or sustainability. Our failure to meet one or
more of these key targets may negatively impact our results of operations, stock price, and stockholder returns. The factors influencing our ability to
meet these key targets include, but are not limited to, changes in the global economic environment, changes in our competitive landscape, including
our relationships with new or existing customers, our ability to introduce new products, applications, or technologies, our undertaking of an
acquisition, joint venture, or other strategic arrangement, the outcome of any new or existing litigation, our failure to comply with new or existing laws
or regulations, and other factors described within this Item 1A – Risk Factors, many of which are beyond our control.
Risks Related to Our Indebtedness
Our current level of 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, 2019, we had approximately $4.2 billion of indebtedness. At December 31, 2019, together with the guarantors, we had
approximately $1.3 billion of indebtedness outstanding under our senior secured credit facilities, and an $800 million revolving credit facility
(“Revolving Credit Facility”) capacity, which would be senior secured indebtedness, if drawn (collectively, the “Senior Secured Credit Facilities”). Our
current 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 flows from operations to make payments on our indebtedness, thereby reducing
the availability of our cash flows 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.
•
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•
•
•
•
The occurrence of any one or more of these circumstances could have a material adverse effect on us.
Our ability to make scheduled payments on and to refinance our indebtedness, including on our outstanding 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 flows from operations or that future borrowings will be available to us in an amount sufficient to enable
us to service our debt, including the outstanding notes, to refinance our debt, or to fund our other liquidity needs.
21
The Chemours Company
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 outstanding 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 holders of our outstanding
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 outstanding 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 certain other agreements relating
to our outstanding indebtedness could also result in an event of default under the indenture governing the outstanding 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 operations and financial condition.
See “Note 20 – Debt” to the Consolidated Financial Statements for further discussion related to our indebtedness.
Despite our current level of indebtedness, we may incur substantially more debt and enter into other transactions, which could further
exacerbate the risks to our financial condition described above.
Notwithstanding our current level of indebtedness, we may incur significant additional indebtedness in the future, including additional secured
indebtedness (including the $800 million under the Revolving Credit Facility) that would be effectively senior to our outstanding notes. Although the
indenture that governs the outstanding 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 additional 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 R&D activities, make investments driven by environmental compliance, 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 R&D projects, and the status and timing of these developments, as well as the 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. 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 outstanding 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 our overall credit ratings and 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 would remain the same, and our net income and cash flows, including cash available for servicing our indebtedness, would
correspondingly decrease. As of December 31, 2019, we had approximately $1.3 billion of our outstanding debt under the Senior Secured Credit
Facilities at variable interest rates.
22
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 outstanding 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 and
negative 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 and other obligations;
paying dividends or making other distributions in respect of, or repurchasing or redeeming, our capital stock;
•
•
• making acquisitions or other investments;
•
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•
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•
•
•
•
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.
23
Risks Related to the Separation
The Chemours Company
If the distribution, in connection with the Separation, 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 U.S. Internal Revenue Service (“IRS”) substantially to the effect that, among other things, the distribution in
connection with the Separation qualified as a tax-free transaction under Section 355 and Section 368(a)(1)(D) of the Internal Revenue Code of 1986,
as amended (“IRC”). 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 IRC, 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 us, DuPont, or our stockholders. The IRS
Ruling and the tax opinion relied on certain facts, assumptions, and undertakings, and certain representations from us and DuPont, 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 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, and/or
local tax law, 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 Separation, 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 IRC 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
IRC. 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 IRC 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.
24
Risks Related to Our Common Stock
Our stock price could become more volatile and investments could lose value.
The Chemours Company
The market price for our common stock may be affected by a number of factors, including, but not limited to:
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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;
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;
a change in our dividend or stock repurchase activities;
changes in applicable rules and regulations and the reputation of 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 this Item 1A – Risk Factors, and elsewhere within this Annual Report on 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. As further described in “Note 22 – Commitments and
Contingent Liabilities” to the Consolidated Financial Statements, lawsuits have been filed alleging that Chemours and certain of its officers have
violated the Exchange Act of 1934.
We cannot guarantee the timing or amount of our dividends and/or our share repurchases, which are subject to a number of uncertainties
that may affect the price of our common stock.
The declaration, payment, and amount of any dividends, and/or the decision to purchase common stock under our share repurchase programs are
subject to the sole discretion of our board of directors and, in the context of our financial policy and capital allocation strategy, will depend upon many
factors, including our financial condition, operating results, cash flows, and relevant 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 or repurchase our common shares in the future.
The reduction or elimination of our dividends or share repurchase programs could adversely affect the price of our common stock. Additionally, any
repurchases of our common stock will reduce the amount of our common stock outstanding. There can be no assurances that any share repurchase
activity will increase stockholder value due to market fluctuations in the price of our common stock, which may reduce the price of our common stock
to levels below the repurchase price. Although our share repurchase programs are designed to enhance long-term shareholder value, short-term
fluctuations in the market price of our common stock could reduce the program’s overall effectiveness.
A stockholder’s percentage of ownership in us may be diluted in the future.
A stockholder’s percentage ownership in our common stock 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.
25
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:
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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 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,
the requirement that stockholders holding at least 80% 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 (“DGCL”). Section 203 of the DGCL provides that, subject to
limited exceptions, persons that (without prior board of directors approval) acquire, or are affiliated with a person that acquires, more than 15% 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% 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/or
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 IRC. Under the tax matters agreement
executed prior to the Separation, we would be required to indemnify DuPont for the tax imposed under Section 355(e) of the IRC 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. See the risk factor, “If the distribution, in connection with
the Separation, 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.
26
The Chemours Company
Item 2. PROPERTIES
Our Production Facilities and Technical Centers
Our corporate headquarters is located 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 sets forth our production facilities at December 31, 2019.
Region
North America
Europe, the Middle East, and
Africa
Latin America
Asia Pacific
Fluoroproducts
El Dorado, Arkansas (1)
Elkton, Maryland (1)
Louisville, Kentucky
Fayetteville, North Carolina
Deepwater, New Jersey
Parlin, New Jersey (2)
Corpus Christi, Texas
LaPorte, Texas (2)
Washington, West Virginia
Mechelen, Belgium
Villers St. Paul, France (1)
Dordrecht, Netherlands
Barra Mansa, Brazil (2)
Manaus, Brazil (1)
Monterrey, Mexico (1)
Changshu, China
Shanghai, China (3)
Sichuan, China (3)
Chiba, Japan (3)
Shimizu, Japan (3)
Production Facilities
Chemical Solutions
Memphis, Tennessee
Shared Locations
Pascagoula, Mississippi (4)
Belle, West Virginia (4)
Titanium Technologies
DeLisle, Mississippi
New Johnsonville, Tennessee
Starke, Florida (Mine & Mineral
Separation)
Folkston, Georgia (Mine)
Offerman, Georgia (Mineral
Separation)
Altamira, Mexico
Kuan Yin, Taiwan
(1)
(2)
(3)
(4)
Site is leased from a third party.
Site is leased from DuPont.
Site with joint venture equity affiliates.
Shared site between the Chemical Solutions and Fluoroproducts segments.
We have technical centers and R&D facilities located at a number of our production facilities. We also maintain stand-alone technical centers to
serve our customers and provide technical support.
The following chart sets forth our stand-alone technical centers at December 31, 2019.
Region
North America
Fluoroproducts
Deepwater, New Jersey
Technical Centers
Chemical Solutions
Titanium Technologies
Europe, the Middle East, and
Africa
Latin America
Asia Pacific
Mechelen, Belgium
Meyrin, Switzerland (2)
Shanghai, China (1)
Shimizu, Japan (3)
(1)
(2)
(3)
(4)
Site is leased from a third party.
Site is leased from DuPont.
Site with joint venture equity affiliates.
There are multiple sites at this location.
Kallo, Belgium (1)
Mexico City, Mexico (1)
Shared Locations
Newark, Delaware
(All Segments)
Wilmington, Delaware
(All Segments) (2,4)
Shanghai, China
(All Segments) (1)
27
The Chemours Company
Our plants and equipment are maintained in good operating condition. We believe that we have sufficient production capacity for our primary
products to meet demand in 2020. Our properties are primarily owned by us; however, certain properties are leased, as noted in the preceding
tables.
We recognize that the security and safety of our operations are critical to our employees and communities, as well as our future. Physical security
measures have been combined with process safety measures, administrative procedures, and emergency response preparedness into an integrated
security plan. We conduct vulnerability assessments at our operating facilities in the U.S., as well as high-priority sites worldwide, and as a result,
identify and implement the appropriate measures to protect these facilities from physical and cyberattacks. We are partnering with carriers, including
railroad, shipping, and trucking companies, to secure chemicals in transit.
Item 3. LEGAL PROCEEDINGS
Legal Proceedings
We are subject to various legal proceedings, including, but not limited to, product liability, intellectual property, personal injury, commercial,
contractual, employment, governmental, environmental, anti-trust, and other such matters that arise in the ordinary course of business. Information
regarding certain of these matters is set forth below and in “Note 22 – Commitments and Contingent Liabilities” 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 22 – Commitments and Contingent
Liabilities” to the Consolidated Financial Statements.
Fayetteville, North Carolina
The following actions related to Fayetteville, as discussed in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial
Statements, are filed in the U.S. District Court for the Eastern District of North Carolina, Southern Division:
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Carey et al. vs. E. I. DuPont de Nemours and Company (7:17-cv-00189-D; 7:17-cv-00197-D; and, 7:17-cv-00201-D);
Cape Fear Public Utility Authority vs. The Chemours Company FC, LLC et al. and Brunswick County v. DowDuPont et al. (7:17-cv-00195-
D and 7:17-cv-00209-D); and,
Dew et al. vs. E. I. DuPont de Nemours and Company et al. (17:18-cv-00030-D).
Environmental Proceedings
LaPorte, Texas
The U.S. Environmental Protection Agency (“EPA”) conducted a multimedia inspection at the DuPont LaPorte, Texas facility in January 2008.
DuPont, the EPA, and the U.S. Department of Justice 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. We operate a
fluoroproducts production facility at this site.
A Proposed Consent Agreement and Final Order (“CAFO”) was received from the EPA in January 2020, alleging CAA Section 112(r) violations
at the LaPorte, Texas site. The alleged violations are under the CAA’s chemical accident prevention provisions (40 CFR Part 68), and the EPA
states that it is seeking a civil penalty of $0.6 million for negotiation purposes. We are reviewing the draft CAFO and the alleged violations, and will
respond to the EPA. At this time, we believe a loss is reasonably possible.
28
Dordrecht, Netherlands
The Chemours Company
We have complied with requests from the local environmental agency (“DCMR,” formerly under the jurisdiction of “OZHZ”), the Labor Inspectorate
(“iSZW”), the Inspectorate for Environment and Transportation (“ILT”), and the Water Authority (“RWS”) in the Netherlands for information and
documents regarding the Dordrecht site’s operations. We have complied with the requests, and the agencies have published several reports
between 2016 and 2018, all of them publicly available. The National Institute for Public Health and the Environment (“RIVM”) has also published
several reports with respect to PFOA and GenX. In December 2018, DCMR imposed a €1 million fine after undertaking waste water tests, which
detected low levels of PFOA. DCMR continued taking samples and has imposed three additional fines between January and May 2019, each of
which was €0.25 million. We have appealed all the fines, and we believe that we have valid defenses to prevail. We continue to cooperate with all
authorities in responding to information requests.
Louisville, Kentucky
In October 2019, we received a $0.15 million fine from the Federal Rail Administration (“FRA”) based on the results of an investigation of our
Antimony Pentachloride railcar shipments, fleet, commodity code accuracy, and condition of valves. We are continuing to investigate this matter and
have submitted a response to the FRA in December 2019.
Fayetteville, North Carolina
In February 2019, we received a Notice of Violation (“NOV”) from the EPA alleging certain TSCA violations at Fayetteville. Matters raised in the NOV
could have the potential to affect operations at Fayetteville. We responded to the EPA in March 2019, asserting that we have not violated
environmental laws. At this time, management does not believe that a loss is probable related to the matters in this NOV. Further discussion related
to this matter is included in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements.
Item 4. MINE SAFETY DISCLOSURES
Information regarding mine safety and other regulatory actions at our surface mines in Starke, Florida and Folkston, Georgia and our mineral sands
separation facility in Offerman, Georgia is included in Exhibit 95 to this Annual Report on Form 10-K.
The following list sets forth our executive officers and a summary of their professional experience.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Mark P. Vergnano, age 62, serves as our President and Chief Executive Officer (“CEO”). Prior to joining Chemours, he held roles of increasing
responsibility at DuPont. 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 and Fluoroproducts and Titanium Technologies. In
June 2006, he was named Group Vice President of DuPont Safety and Protection. In October 2005, he was named Vice President and General
Manager – Surfaces and Building Innovations. In 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 was appointed Chairman of the National Safety Council in 2017 and has served on its board of directors since
2007. He has also served on the board of directors of the American Chemistry Council since 2015 and was appointed Chairman in 2019, and he has
served on the board of directors of 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 56, serves as our Senior Vice President and Chief Operating Officer (“COO"). Mr. Newman was appointed Senior Vice
President and COO in June 2019, prior to which time he had served as our Senior Vice President and Chief Financial Officer (“CFO”) since
November 2014. Mr. Newman joined Chemours in November 2014 from SunCoke Energy, Inc. (“SunCoke”), where he was SunCoke’s Senior Vice
President and CFO 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, L.P. in January
2013, creating the first coke-manufacturing master limited partnership. Prior to joining SunCoke, Mr. Newman served as Vice President –
Remarketing and Managing Director of SmartAuction, Ally Financial Inc. (previously, the General Motors Acceptance Corporation). Mr. Newman
began his career at the General Motors Company in 1986 as an Industrial Engineer and progressed through several financial and operational
leadership roles within the global automaker, including Vice President and CFO of Shanghai General Motors Limited; Assistant Treasurer of General
Motors Corporation; and, Vice President – North America and CFO. Mr. Newman has served on the board of Altria Group, Inc. since February 2018.
29
The Chemours Company
Sameer Ralhan, age 46, serves as our Senior Vice President, CFO, and Treasurer. Mr. Ralhan was appointed Senior Vice President and CFO in
June 2019. Mr. Ralhan joined Chemours in November 2014 and has held several positions of increasing responsibility in strategy, mergers and
acquisitions (“M&A”), finance, and treasury. He served as Vice President, Business Finance and Treasurer from 2018 to 2019, and Vice President,
Business Finance and Head of M&A from 2016 to 2018. He also served as Treasurer and Head of M&A from 2015 to 2016, and Head of M&A from
2014 to 2015. Prior to joining Chemours, Mr. Ralhan served as a Managing Director in the Global Natural Resources Group of Goldman Sachs & Co.
During his tenure at Goldman Sachs and Co., from 2007 to 2014, he advised companies in the chemicals, industrials, and basic materials sectors on
M&A, portfolio transformations, corporate finance matters, and capital markets transactions. Mr. Ralhan also served as an associate in the
investment banking group of Bank of America Securities, LLC from 2004 to 2007. Mr. Ralhan began his career as a Chemical Engineer and brings
chemicals industry operating experience from his time (1998 – 2002) at Aspen Technology, Inc., where, as an advanced process control engineer,
he executed manufacturing process improvement and operational enhancement initiatives for several global chemical and petrochemical companies.
Edwin C. Sparks, age 46, serves as our President – Fluoroproducts and President – Chemical Solutions. Mr. Sparks was appointed to these roles
in October 2019 and April 2018, respectively. Previously, he served as Director of Corporate Strategy from 2017 to 2018 and Global Planning
Director – Titanium Technologies from 2016 to 2017. He also served as the Asia Pacific Business Director – Titanium Technologies from 2015 to
2016, based in Singapore. Prior to joining Chemours, he held leadership positions of increasing scope in the DuPont Titanium Technologies
business, with responsibilities including sales, marketing, operations, strategy, and technology. Mr. Sparks joined DuPont in 1994 as a process
engineer.
Bryan Snell, age 63, 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 from 2014 to 2015. Prior to that, he held leadership positions in
DuPont Titanium Technologies, including Planning Director from 2011 to 2012 in Wilmington, Delaware and from 2012 to 2013 in Singapore, and
Global Sales and Marketing Director from 2008 to 2010. Mr. Snell served as Regional Operations Director – DuPont Coatings and Color
Technologies Platform in 2007 and 2008. He was based 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 mergers and acquisitions.
David C. Shelton, age 56, serves as our Senior Vice President, General Counsel, and Corporate Secretary. Prior to Chemours, Mr. Shelton was
appointed Associate General Counsel for DuPont in 2011 and was responsible for the U.S. Commercial team, which included the business lawyers
and paralegals counseling all DuPont business units, with the exception of Agriculture. Mr. Shelton also served as 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.
Susan M. Kelliher, age 53, serves as our Senior Vice President – Human Resources and Health Services. Ms. Kelliher joined Chemours in 2017
from Albemarle Corporation (“Albemarle”), where she served as Senior Vice President – Human Resources for the global specialty chemical
company. Prior to Albemarle, she served as Vice President – Human Resources at Hewlett Packard, where she held a number of leadership
positions on global teams including Imaging and Printing and Global Sales and Enterprise Marketing from 2007 to 2012. Before joining Hewlett
Packard, Ms. Kelliher served as Vice President – Human Resources for Cymer, Inc. (“Cymer”), where she led the people function. She joined Cymer
from The Home Depot where, from 2004 to 2007, she was the Vice President – Human Resources for the growth engines of the company –
Business Development and Home Services including responsibility for due diligence and integration for the company’s acquisitions. From 2000 to
2004, Ms. Kelliher served as Senior Director of Human Resources for Corporate Business Development and International Operations for the
Raytheon Company (“Raytheon”). Prior to Raytheon, she served as the Director of Human Resources – Western Region for YUM! Brands, Pizza Hut
division from 1995 to 2000. Ms. Kelliher started her career at Mobil Oil, where her career progressed through a variety of assignments including
support for new ventures in Europe, Russia, and Africa from 1990 to 1995.
Erich Parker, age 68, serves as our Senior 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 news 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, District of Columbia and New York. Mr. Parker has also served as Executive
Vice President of Association and 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.
30
The Chemours Company
PART II
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
Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol, “CC.” The number of record holders of our common stock
was 45,310 at February 10, 2020. Holders of our common stock are entitled to receive dividends when they are declared by our board of directors,
and dividends are generally declared and paid on a quarterly basis. The stock transfer agent and registrar is Computershare Trust Company, N.A.
Unregistered Sales of Equity Securities
None.
Issuer Purchases of Equity Securities
2017 Share Repurchase Program
On November 30, 2017, our board of directors approved a share repurchase plan authorizing the purchase of shares of our issued and outstanding
common stock in an aggregate amount not to exceed $500 million, plus any associated fees or costs in connection with our share repurchase activity
(the “2017 Share Repurchase Program”). Under the 2017 Share Repurchase Program, shares of our common stock were purchased in the open
market from time to time, subject to management’s discretion, as well as general business and market conditions. Our 2017 Share Repurchase
Program became effective on November 30, 2017, and was announced to the public on December 1, 2017. On May 31, 2018, we completed the
aggregate $500 million in authorized purchases of our issued and outstanding common stock under the 2017 Share Repurchase Program, which
amounted to a cumulative 10,085,647 shares purchased at an average share price of $49.58 per share. All common shares purchased under the
2017 Share Repurchase Program are held as treasury stock and are accounted for using the cost method.
2018 Share Repurchase Program
On August 1, 2018, our board of directors approved a share repurchase program authorizing the purchase of shares of our issued and outstanding
common stock in an aggregate amount not to exceed $750 million, plus any associated fees or costs in connection with our share repurchase activity
(the “2018 Share Repurchase Program”). On February 13, 2019, our board of directors increased the authorization amount of the 2018 Share
Repurchase Program from $750 million to $1.0 billion. Under the 2018 Share Repurchase Program, shares of our common stock can be purchased
on the open market from time to time, subject to management’s discretion, as well as general business and market conditions. Our 2018 Share
Repurchase Program became effective on August 1, 2018, was announced to the public on August 2, 2018, and will continue through the earlier of
its expiration on December 31, 2020, or the completion of repurchases up to the approved amount. The program may be suspended or discontinued
at any time. All common shares purchased under the 2018 Share Repurchase Program are expected to be held as treasury stock and accounted for
using the cost method.
As of December 31, 2019, we have purchased a cumulative 15,245,999 shares of our issued and outstanding common stock under the 2018 Share
Repurchase Program, which amounted to $572 million at an average share price of $37.52 per share. There were no share repurchases under the
2018 Share Repurchase Program for the three months ended December 31, 2019. The aggregate amount of our common stock that remained
available for purchase under the 2018 Share Repurchase Program at December 31, 2019 was $428 million.
31
Stock Performance Graph
The Chemours Company
The following graph presents the cumulative total stockholder returns for our common stock compared with the Standard & Poor’s (“S&P”) MidCap
400 and the S&P MidCap 400 Chemical indices since our Separation from DuPont on July 1, 2015, the date that our common stock began “regular-
way” trading on the NYSE.
The graph assumes that the values of our common stock, the S&P MidCap 400 index, and the S&P MidCap 400 Chemical index were each $100 on
July 1, 2015, and that all dividends were reinvested.
32
Item 6. SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The Chemours Company
The selected historical consolidated financial data for each of the years ended December 31, 2019, 2018, and 2017, and as of December 31, 2019
and 2018 was derived from the audited consolidated financial statements included in the Consolidated Financial Statements of this Annual Report on
Form 10-K. The selected historical consolidated financial data for each of the years ended December 31, 2016 and 2015, and as of December 31,
2017, 2016, and 2015 was derived from our audited consolidated financial statements not included in this Annual Report on Form 10-K.
The selected historical consolidated financial data for the first six months of the year ended December 31, 2015 includes expenses of DuPont that
were allocated to us for certain corporate functions, including information technology, R&D, finance, legal, insurance, compliance, and human
resources activities. These costs may not be representative of our actual costs as an independent, publicly-traded company. In addition, our selected
historical consolidated financial data does not reflect changes related to our Separation from DuPont, including changes in our cost structure,
personnel needs, tax structure, capital structure, financing, and business operations. Consequently, the financial information included herein may not
necessarily reflect what our financial position, results of operations, and cash flows would have been had we been an independent, publicly-traded
company during the periods presented. Accordingly, these historical results should not be relied upon as an indicator of our future performance. For
a better understanding of our financial results, this section should be read in conjunction with Item 7 – Management’s Discussion and Analysis of
Financial Condition and Results of Operations and the Consolidated Financial Statements.
The following table sets forth our selected historical consolidated financial data as of and for the years ended December 31, 2019, 2018, 2017, 2016,
and 2015.
(Dollars in millions, except per share amounts)
Summary consolidated statements of operations data
Net sales
Restructuring, asset-related, and other charges
(Loss) income before income taxes
(Benefit from) provision for income taxes
Net (loss) income attributable to Chemours
Basic (loss) earnings per share of common stock (1,2)
Diluted (loss) earnings per share of common stock (1,2)
Summary consolidated balance sheets data
Working capital, net (3)
Total assets
Debt, net (4)
Other summary consolidated financial data
Purchases of property, plant, and equipment
Depreciation and amortization
Dividends per share of common stock (5,6)
2019
Year Ended December 31,
2017
2016
2018
2015
$
$
$
$
5,526
87
(124)
(72)
(52)
(0.32)
(0.32)
$
$
1,236
7,258
4,160
481
311
1.00
$
$
$
6,638
49
1,155
159
995
5.62
5.45
1,584
7,362
3,972
498
284
0.67
$
$
$
6,183
57
912
165
746
4.04
3.91
1,845
7,293
4,112
411
273
0.29
$
5,400
170
(11)
(18)
7
0.04
0.04
$
$
782
6,060
3,544
338
284
0.12
5,717
333
(188)
(98)
(90)
(0.50)
(0.50)
835
6,298
3,954
519
267
0.58
(1)
(2)
(3)
(4)
(5)
(6)
For the first six months of the year ended December 31, 2015, pro forma earnings per share was calculated based on 180,966,833 shares of our common stock that were
distributed to DuPont’s shareholders on July 1, 2015. The same number of shares was used to calculate basic and diluted earnings per share since none of our equity
awards were outstanding prior to the Separation.
In periods where the Company incurs a net loss, the impact of potentially dilutive securities is excluded from the calculation of earnings per share as its inclusion would have
an anti-dilutive effect.
Defined as current assets minus current liabilities. Our current assets include cash and cash equivalents of $943 million, $1.2 billion, $1.6 billion, $902 million, and $366
million at December 31, 2019, 2018, 2017, 2016, and 2015, respectively.
Amounts at December 31, 2019, 2018, 2017, 2016, and 2015 include unamortized debt issuance costs and discount of $36 million, $45 million, $49 million, $47 million, and
$60 million, respectively.
Dividends per share of common stock for the year ended December 31, 2015 includes the following: (i) dividends of an aggregate amount of $100 million declared prior to the
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,
(ii) dividends of $0.03 per share declared after the Separation by our independent board of directors, which was paid on December 14, 2015 to our shareholders of record as
of November 13, 2015.
Dividends per share of common stock for the year ended December 31, 2017 includes a $0.17 per share dividend declared in December 2017, which was paid on March 15,
2018 to our shareholders of record as of February 15, 2018. In the third quarter of 2018, we increased our quarterly dividend declared to $0.25 per share. Our quarterly
dividends declared in 2019 remained at $0.25 per share.
33
The Chemours Company
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) supplements the Consolidated Financial
Statements and the related notes thereto included elsewhere herein to help provide an understanding of our financial condition, changes in our
financial condition, and the results of our operations for the years ended December 31, 2019 and 2018 and the changes therein. For the year ended
December 31, 2017, and changes from the year ended December 31, 2017 to the year ended December 31, 2018, management’s discussion and
analysis pertaining to our financial condition, changes in our financial condition, and the results of our operations have been omitted from this MD&A
and may be found in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations as included in our Annual
Report on Form 10-K for the year ended December 31, 2018.
Our forward-looking statements are based on certain assumptions and expectations of future events that may not be accurate or realized. These
statements, as well as our historical performance, are not guarantees of future performance. Forward-looking statements also involve risks and
uncertainties that are beyond our control. Additionally, there may be other risks and uncertainties that we are unable to identify at this time or that we
do not currently expect to have a material impact on our business. Factors that could cause or contribute to these differences include, but are not
limited to, the risks, uncertainties, and other factors discussed within Item 1A – Risk Factors.
This MD&A should be read in conjunction with the Consolidated Financial Statements and the related notes thereto included elsewhere in this
Annual Report on Form 10-K.
Overview
We are a leading, global provider of performance chemicals that are key inputs in end-products and processes in a variety of industries. We deliver
customized solutions with a wide range of industrial and specialty chemical products for markets, including plastics and coatings, refrigeration and air
conditioning, general industrial, electronics, mining, and oil refining. Our principal products include refrigerants, industrial fluoropolymer resins,
sodium cyanide, performance chemicals and intermediates, and TiO2 pigment. We manage and report our operating results through three reportable
segments: Fluoroproducts, Chemical Solutions, and Titanium Technologies. Our Fluoroproducts segment is a leading, global provider of
fluoroproducts, including refrigerants and industrial fluoropolymer resins. Our Chemical Solutions segment is a leading, North American provider of
industrial chemicals used in gold production, industrial, and consumer applications. Our Titanium Technologies segment is a leading, global provider
of TiO2 pigment, a premium white pigment used to deliver whiteness, brightness, opacity, and protection in a variety of applications.
Recent Developments
Fayetteville Works, Fayetteville, North Carolina
In February 2019, we entered into a final Consent Order with the North Carolina Department of Environmental Quality (“NC DEQ”) and Cape Fear
River Watch, a non-profit organization. The final Consent Order comprehensively addressed certain legal and environmental matters at our
Fayetteville Works site in Fayetteville, North Carolina (“Fayetteville”) and was accepted by the North Carolina Superior Court for Bladen County.
In connection with the Consent Order, a thermal oxidizer (“TO”) became fully operational at the site in December 2019, and we switched to the
permitted operating scenario for the TO on December 31, 2019 as required by the Consent Order. The TO is designed to reduce aerial PFAS
emissions from Fayetteville, and, within 90 days of installation, we, along with the North Carolina Division of Air Quality, will conduct testing to
confirm whether the TO is destroying 99.99% of all PFAS air emissions routed to it, utilizing a 2017 baseline.
In the fourth quarter of 2019, we completed and submitted our Cape Fear River PFAS Loading Reduction Plan - Supplemental Information Report
and Corrective Action Plan (“CAP”) to NC DEQ. The Supplemental Information Report provides information to support the evaluation of potential
remedial options to reduce PFAS loadings to surface waters, including interim alternatives. The CAP describes potential remediation activities to
address PFAS in on-site groundwater and surface waters at the site, in accordance with the requirements of the Consent Order and the North
Carolina groundwater standards, and builds on the previous submissions to NC DEQ. In the fourth quarter of 2019, based on the Consent Order,
CAP, and our plans, we accrued an additional $132 million related to the estimated cost of on-site remediation.
See “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements for further information about environmental
remediation at Fayetteville.
34
Netherlands Pension Plan
The Chemours Company
In the fourth quarter of 2019, we completed a settlement transaction related to a significant portion of our Netherlands pension plan. The future risk,
responsibility, and administration associated with the $932 million of inactive participants’ vested pension benefits was transferred to a third-party
asset management company via an irrevocable transaction in December 2019, thereby eliminating our exposure to the pension liabilities and
formally effecting the settlement. The cumulative loss associated with the inactive participants’ vested pension benefits was recognized in earnings,
resulting in a charge of $380 million recognized in other expense, net in the consolidated statements of operations. At December 31, 2019, the
projected benefit obligations associated with the plan’s active employees remained on our consolidated balance sheet.
2019 Restructuring Program
In an effort to better align our cost structure with market opportunities, we recorded net severance charges of $22 million during the year ended
December 31, 2019. Impacted employees are subject to our customary involuntary termination benefits. The majority of the employees separated
from the Company during the fourth quarter of 2019, and the majority of the associated severance payments will be made by the end of 2020.
Also, in the third quarter of 2019, we announced plans to exit the Methylamines and Methylamides business at our Belle, West Virginia
manufacturing plant, which culminated in our completed exit and sale of the business to Belle Chemical Company, a subsidiary of Cornerstone
Chemical Company, in the fourth quarter of 2019. As a result, for the year ended December 31, 2019, we recorded accelerated depreciation of $34
million, which is reflected as a component of restructuring, asset-related, and other charges in the consolidated statement of operations. Upon
completion of the sale, we also recorded an additional pre-tax loss on sale of $2 million, net of a benefit from working capital adjustments, in other
expense, net in the consolidated statements of operations. Both of the aforementioned charges relate to Chemical Solutions, and we do not expect
to incur additional charges related to our exit of the Methylamines and Methylamides business.
Accounts Receivable Securitization Facility
In July 2019, we, through a wholly-owned special purpose entity, entered into an accounts receivable securitization facility (“Securitization Facility”)
to enhance our liquidity. The original borrowings amounted to $125 million, which, along with available cash, was used to pay down our then
outstanding revolving loan. At December 31, 2019, our net borrowings under the Securitization Facility were $110 million.
Capital Allocation
For the year ended December 31, 2019, we returned $486 million in cash to our shareholders by purchasing $322 million in our issued and
outstanding common stock under our 2018 Share Repurchase Program, and through the payment of $164 million in cash dividends, thereby fulfilling
our goal of returning the majority of our free cash flows to shareholders.
At December 31, 2019, the aggregate amount of our common stock that remained available for purchase under the 2018 Share Repurchase
Program was $428 million.
35
Results of Operations and Business Highlights
Results of Operations
The Chemours Company
The following table sets forth our results of operations for the years ended December 31, 2019 and 2018.
(Dollars in millions, except per share amounts)
Net sales
Cost of goods sold
Gross profit
Selling, general, and administrative expense
Research and development expense
Restructuring, asset-related, and other charges
Total other operating expenses
Equity in earnings of affiliates
Interest expense, net
Loss on extinguishment of debt
Other (expense) income, net
(Loss) income before income taxes
(Benefit from) provision for income taxes
Net (loss) income
Less: Net income attributable to non-controlling interests
Net (loss) income attributable to Chemours
Per share data
Basic (loss) earnings per share of common stock
Diluted (loss) earnings per share of common stock
Net Sales
Year Ended December 31,
2019
2018
$
$
$
$
$
$
5,526
4,463
1,063
548
80
87
715
29
(208)
—
(293)
(124)
(72)
(52)
—
(52)
(0.32)
(0.32)
The following table sets forth the impacts of price, volume, and currency on our net sales for the year ended December 31, 2019.
Change in net sales from prior period
Price
Volume
Currency
Total change in net sales
Year Ended December 31,
2019
6,638
4,667
1,971
657
82
49
788
43
(195)
(38)
162
1,155
159
996
1
995
5.62
5.45
(2)%
(14)%
(1)%
(17)%
Our net sales decreased by $1.1 billion (or 17%) to $5.5 billion for the year ended December 31, 2019, compared with net sales of $6.6 billion for the
same period in 2018. The components of the decrease in our net sales by segment for the year ended December 31, 2019 were as follows: in our
Fluoroproducts segment, price declined 2% and volume was down 4%; in our Chemical Solutions segment, price declined 4% and volume was down
7%; and, in our Titanium Technologies segment, price declined 1% and volume was down 24%. Unfavorable currency movements also added a 1%
headwind to net sales in our Fluoroproducts and Titanium Technologies segments.
The drivers of these changes for each of our segments are discussed further under the heading “Segment Reviews” within this MD&A.
Cost of Goods Sold
Our cost of goods sold (“COGS”) decreased by $204 million (or 4%) to $4.5 billion for the year ended December 31, 2019, compared with COGS of
$4.7 billion for the same period in 2018. The decrease in our COGS for the year ended December 31, 2019 was primarily attributable to lower net
sales volumes, as well as lower distribution, freight, and logistics expenses. These decreases were partially offset by operational headwinds in our
Fluoroproducts segment, and higher raw materials costs and lower fixed cost absorption in our Titanium Technologies segment. Additionally, during
the year ended December 31, 2019, we incurred $150 million for environmental remediation activities related to Fayetteville.
36
Selling, General, and Administrative Expense
The Chemours Company
Our selling, general, and administrative (“SG&A”) expense decreased by $109 million (or 17%) to $548 million for the year ended December 31,
2019, compared with SG&A expense of $657 million for the same period in 2018. The decrease in our SG&A expense for the year ended December
31, 2019 was primarily attributable to lower performance-related compensation costs, as well as costs incurred for our 2018 debt transactions, which
did not recur in 2019. The year ended December 31, 2018 also included the accrual of $63 million for estimated liabilities associated with ongoing
environmental matters at Fayetteville. These comparative decreases for the year ended December 31, 2019 are partially offset by $18 million
incurred during the first quarter of 2019, in connection with the approved final Consent Order to settle certain legal and environmental matters at
Fayetteville.
Research and Development Expense
Our R&D expense was largely unchanged at $80 million for the year ended December 31, 2019 and $82 million for the year ended December 31,
2018.
Restructuring, Asset-related, and Other Charges
Our restructuring, asset-related, and other charges amounted to $87 million and $49 million for the years ended December 31, 2019 and 2018,
respectively.
For the year ended December 31, 2019, our restructuring, asset-related, and other charges were primarily attributable to $22 million of employee
separation charges incurred in connection with our 2019 Restructuring Program, as well as $34 million of accelerated depreciation recorded in
conjunction with our exit of the Methylamines and Methylamides business at our Belle, West Virginia manufacturing plant. We also recognized $20
million in decommissioning and dismantling-related charges, primarily attributable to the demolition and removal of certain unused buildings at our
Chambers Works site in Deepwater, New Jersey, as well as $9 million of accelerated depreciation associated with the discontinuation of the titanium
tetrachloride product line at our New Johnsonville, Tennessee site.
For the year ended December 31, 2018, our restructuring, asset-related, and other charges were primarily attributable to employee separation and
other charges incurred in connection with our 2017 restructuring program of $27 million, and employee separation charges of $5 million for our 2018
restructuring program. In addition, we recognized $13 million in decommissioning and dismantling-related charges, primarily attributable to the
demolition and removal of certain unused buildings at our Chambers Works site in Deepwater, New Jersey, and an asset-related charge of $4 million
for a goodwill impairment in our Chemical Solutions segment.
Equity in Earnings of Affiliates
Our equity in earnings of affiliates decreased by $14 million (or 33%) to $29 million for the year ended December 31, 2019, compared with equity in
earnings of affiliates of $43 million for the same period in 2018. The decrease in our equity in earnings of affiliates for the year ended December 31,
2019 was primarily attributable to global semiconductor and automotive market softness for our equity method investees in the Fluoroproducts
segment.
Interest Expense, Net
Our interest expense, net increased by $13 million (or 7%) to $208 million for the year ended December 31, 2019, compared with interest expense,
net of $195 million for the same period in 2018. The increase in our interest expense, net for the year ended December 31, 2019 was primarily
attributable to a reduction in interest income earned on lower cash and cash equivalents balances, as well as less interest capitalized following the
completion or stoppage of certain of our large-scale construction projects. These increases were partially offset by lower interest expense following
our 2018 debt transactions.
Loss on Extinguishment of Debt
For the year ended December 31, 2019, we did not extinguish any of our outstanding debt.
For the year ended December 31, 2018, we recognized a combined loss on extinguishment of debt of $38 million in connection with the amendment
and restatement of our credit agreement, and our tender offers to purchase any and all of our outstanding euro-denominated 6.125% senior
unsecured notes due May 2023 and a portion of our outstanding U.S. dollar-denominated 6.625% senior unsecured notes due May 2023.
37
Other Income (Expense), Net
The Chemours Company
Our other income, net decreased by $455 million to other expense, net of $293 million for the year ended December 31, 2019, compared with other
income, net of $162 million for the same period in 2018. The decrease in our other income, net for the year ended December 31, 2019 was primarily
attributable to $368 million in non-operating pension and other post-retirement employee benefit loss, which is inclusive of a $380 million expense
recognized upon settlement of the portion of our Netherlands pension plan pertaining to inactive participants’ vested pension benefits. We also
experienced a decrease in miscellaneous income, which is primarily attributable to $26 million lower EU fluorinated greenhouse gas (“F-Gas”) quota
authorization sales. The comparative decrease in our other income, net is also reflective of a $42 million gain on the sale of our Linden, New Jersey
site during the year ended December 31, 2018. These decreases were partially offset by recognition of a previously deferred non-cash gain of $9
million during the year ended December 31, 2019. The gain, which was associated with the sale of our Repauno site in Gibbstown, New Jersey, had
been deferred until certain environmental obligations were fulfilled.
Provision for (Benefit from) Income Taxes
Our benefit from income taxes amounted to $72 million for the year ended December 31, 2019, representing an effective tax rate of 58%. Our
provision for income taxes amounted to $159 million for the year ended December 31, 2018, representing an effective tax rate of 14%.
The $231 million decrease in our provision for income taxes for the year ended December 31, 2019, when compared with the same period in 2018,
was primarily attributable to reduced profitability and the geographic mix of our earnings. In addition, our benefit from income taxes for the year
ended December 31, 2019 included $14 million in windfall benefit from our share-based payments, which was partially offset by an $8 million
valuation allowance on certain foreign subsidiary earnings and certain foreign tax credits. Our provision for income taxes for the year ended
December 31, 2018 included $14 million in windfall benefit from our share-based payments, a $15 million benefit from the release of a valuation
allowance against our foreign tax credits, and a net $10 million benefit from certain other provisions of U.S. tax reform.
Segment Reviews
Adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”) is the primary measure of segment performance used
by our Chief Operating Decision Maker (“CODM”) and is defined as income (loss) before income taxes, excluding the following:
•
•
•
•
•
•
•
interest expense, depreciation, and amortization;
non-operating pension and other post-retirement employee benefit costs, which represents the component of net periodic pension
(income) costs excluding the service cost component;
exchange (gains) losses included in other income (expense), net;
restructuring, asset-related, and other charges;
asset impairments;
(gains) losses on sales of assets and businesses; and,
other items not considered indicative of our ongoing operational performance and expected to occur infrequently.
A reconciliation of Adjusted EBITDA to net income (loss) attributable to Chemours for the years ended December 31, 2019 and 2018 is included in
the “Non-GAAP Financial Measures” section of this MD&A.
The following table sets forth our Adjusted EBITDA by segment for the years ended December 31, 2019 and 2018.
(Dollars in millions)
Fluoroproducts
Chemical Solutions
Titanium Technologies
Segment Adjusted EBITDA
Corporate and Other
Total Adjusted EBITDA
Year Ended December 31,
2019
2018
578
80
505
1,163
(143)
1,020
$
$
783
64
1,055
1,902
(162)
1,740
$
$
38
Fluoroproducts
The Chemours Company
The following table sets forth the net sales, Adjusted EBITDA, and Adjusted EBITDA margin amounts for our Fluoroproducts segment for the years
ended December 31, 2019 and 2018.
(Dollars in millions)
Segment net sales
Adjusted EBITDA
Adjusted EBITDA margin
Year Ended December 31,
2019
2018
$
$
2,648
578
22%
2,862
783
27%
The following table sets forth the impacts of price, volume, and currency on our Fluoroproducts segment’s net sales for the year ended December
31, 2019.
Change in segment net sales from prior period
Price
Volume
Currency
Total change in segment net sales
Segment Net Sales
Year Ended December 31,
2019
(2)%
(4)%
(1)%
(7)%
Our Fluoroproducts segment’s net sales decreased by $214 million (or 7%) to $2.6 billion for the year ended December 31, 2019, compared with
segment net sales of $2.9 billion for the same period in 2018. The decrease in segment net sales for the year ended December 31, 2019 was
primarily attributable to decreases in volume and price of 4% and 2%, respectively. Illegal imports of legacy HFC refrigerants into the EU, in violation
of the EU’s F-gas regulations, impacted both volume and price during the year ended December 31, 2019. Volumes also declined due to lower
demand for our legacy base refrigerants and polymers, which was driven by softness in global markets, primarily the automotive and electronics
markets. These decreases were partially offset by volume increases from the continued adoption of OpteonTM products in mobile applications and
growth in high-grade Fluoropolymers sales. Unfavorable currency movements added a 1% headwind to the segment’s net sales during the year
ended December 31, 2019.
Segment Adjusted EBITDA and Adjusted EBITDA Margin
Segment Adjusted EBITDA decreased by $205 million (or 26%) to $578 million and segment Adjusted EBITDA margin decreased by approximately
500 basis points to 22% for the year ended December 31, 2019, compared with segment Adjusted EBITDA of $783 million and segment Adjusted
EBITDA margin of 27% for the same period in 2018. The decreases in segment Adjusted EBITDA and segment Adjusted EBITDA margin for the
year ended December 31, 2019 were primarily attributable to the aforementioned decreases in the price and volume and unfavorable currency
movements in the segment’s net sales. We also experienced increased costs during the year ended December 31, 2019 due to the start-up of our
new OpteonTM refrigerants facility in Corpus Christi, Texas, and unplanned outages at certain facilities. Additionally, our F-gas quota authorization
sales decreased by $26 million when compared to the year ended December 31, 2018.
The segment’s operating results for the years ended December 31, 2019 and 2018 included $22 million and $34 million, respectively, of additional
costs for process waste water treatment at Fayetteville. We expect to continue to incur these costs as we actively work with the NC DEQ to resolve
the suspension of our National Pollutant Discharge Elimination System permit.
39
Chemical Solutions
The Chemours Company
The following table sets forth the net sales, Adjusted EBITDA, and Adjusted EBITDA margin amounts for our Chemical Solutions segment for the
years ended December 31, 2019 and 2018.
(Dollars in millions)
Segment net sales
Adjusted EBITDA
Adjusted EBITDA margin
Year Ended December 31,
2019
2018
$
$
533
80
15%
602
64
11%
The following table sets forth the impacts of price, volume, and currency on our Chemical Solutions segment’s net sales for the year ended
December 31, 2019.
Change in segment net sales from prior period
Price
Volume
Currency
Total change in segment net sales
Segment Net Sales
Year Ended December 31,
2019
(4)%
(7)%
—%
(11)%
Our Chemical Solutions segment’s net sales decreased by $69 million (or 11%) to $533 million for the year ended December 31, 2019, compared
with segment net sales of $602 million for the same period in 2018. The decrease in segment net sales for the year ended December 31, 2019 was
primarily attributable to decreases in volume and price of 7% and 4%, respectively, which were driven by operational issues at a key customer mine
in Mining Solutions and lower prices for certain Performance Chemicals and Intermediates products, mainly driven by mix and raw material cost
pass-throughs as stipulated in certain contracts.
Segment Adjusted EBITDA and Adjusted EBITDA Margin
Segment Adjusted EBITDA increased by $16 million (or 25%) to $80 million and segment Adjusted EBITDA margin increased by approximately 400
basis points to 15% for the year ended December 31, 2019, compared with segment Adjusted EBITDA of $64 million and segment Adjusted EBITDA
margin of 11% for the same period in 2018. The increases in segment Adjusted EBITDA and segment Adjusted EBITDA margin for the year ended
December 31, 2019 were primarily attributable to increased license income and lower cost of goods sold, partially offset by the aforementioned
decreases in net sales.
40
Titanium Technologies
The Chemours Company
The following table sets forth the net sales, Adjusted EBITDA, and Adjusted EBITDA margin amounts for our Titanium Technologies segment for the
years ended December 31, 2019 and 2018.
(Dollars in millions)
Segment net sales
Adjusted EBITDA
Adjusted EBITDA margin
Year Ended December 31,
2019
2018
$
$
2,345
505
22%
3,174
1,055
33%
The following table sets forth the impacts of price, volume, and currency on our Titanium Technologies segment’s net sales for the year ended
December 31, 2019.
Change in segment net sales from prior period
Price
Volume
Currency
Total change in segment net sales
Segment Net Sales
Year Ended December 31,
2019
(1)%
(24)%
(1)%
(26)%
Our Titanium Technologies segment’s net sales decreased by $829 million (or 26%) to $2.3 billion for the year ended December 31, 2019, compared
with segment net sales of $3.2 billion for the same period in 2018. The decrease in segment net sales for the year ended December 31, 2019 was
primarily attributable to a 24% decrease in volume, driven by lower TiPureTM TiO2 net sales volumes due to market destocking and share loss. Price
declined modestly by 1%, primarily due to customer, regional, and channel mix, but remained largely stable as a result of our TVS strategy. We also
experienced a 1% headwind from unfavorable currency movements.
Segment Adjusted EBITDA and Adjusted EBITDA Margin
Segment Adjusted EBITDA decreased by $550 million (or 52%) to $505 million and segment Adjusted EBITDA margin decreased by approximately
1,100 basis points to 22% for the year ended December 31, 2019, compared with segment Adjusted EBITDA of $1.1 billion and segment Adjusted
EBITDA margin of 33% for the same period in 2018. The decreases in segment Adjusted EBITDA and segment Adjusted EBITDA margin for the
year ended December 31, 2019 were primarily attributable to the aforementioned decreases in segment net sales volume associated with market
destocking and share loss, as well as margin compression due to higher costs for certain raw materials and lower fixed cost absorption as we
reduced production rates to match reduced customer demand.
Corporate and Other
Corporate costs and certain legacy legal and environmental expenses, stock-based compensation costs, and foreign exchange gains and losses
arising from the remeasurement of balances in currencies other than the functional currency of our legal entities are reflected in Corporate and
Other.
Corporate and Other costs decreased by $19 million (or 12%) to $143 million for the year ended December 31, 2019, compared with Corporate and
Other costs of $162 million for the same period in 2018. The decrease in Corporate and Other costs for the year ended December 31, 2019 was
primarily attributable to lower performance-related compensation and lower costs for certain legacy legal matters.
41
2020 Outlook
The Chemours Company
Our 2020 results will be driven by the following expectations: (i) 2020 volume for our Titanium Technologies segment will continue to recover as we
further execute our TVS strategy; (ii) there will be continued transition to OpteonTM refrigerants in our Fluoroproducts segment, which will be offset by
the impacts of illegal imports of legacy HFC refrigerants into the EU in violation of the region’s F-gas regulations; and, (iii) there will be continued
demand for Mining Solutions products in our Chemical Solutions segment. We expect that our capital expenditures will be approximately $400
million.
Our outlook for 2020 reflects our current visibility and expectations based on market factors, such as currency movements, macro-economic factors,
and end-market demand. In particular, end-market demand may be impacted by factors beyond our control, such as the recent spread of the novel
coronavirus. Our ability to meet our expectations are subject to numerous risks, including, but not limited to, those described in Item 1A – Risk
Factors.
Liquidity and Capital Resources
Our primary sources of liquidity are cash generated from operations, available cash, receivables securitization, and borrowings under our debt
financing arrangements, which are described in further detail in “Note 20 – Debt” to the Consolidated Financial Statements. We believe these
sources are sufficient to fund our planned operations and to meet our interest, dividend, and contractual obligations. Our financial policy seeks to: (i)
selectively invest in organic and inorganic growth to enhance our portfolio, including certain strategic capital investments; (ii) return cash to
shareholders through dividends and share repurchases; and, (iii) maintain appropriate leverage by using free cash flows to repay outstanding
borrowings. Subject to approval by our board of directors, we may raise additional capital or borrowings from time to time, or seek to refinance our
existing debt. There can be no assurances that future capital or borrowings will be available to us, and the cost and availability of new capital or
borrowings could be materially impacted by market conditions. Further, the decision to refinance our existing debt is based on a number of factors,
including general market conditions and our ability to refinance on attractive terms at any given point in time. Any attempts to raise additional capital
or borrowings, or refinance our existing debt, could cause us to incur significant charges. Such charges could have a material impact on our financial
position, results of operations, or cash flows.
Our operating cash flow generation is driven by, among other things, the general global economic conditions at any point in time and their resulting
impacts on demand for our products, raw materials and energy prices, and industry-specific issues, such as production capacity and utilization. We
have generated strong operating cash flows through various industry and economic cycles, evidencing the operating strength of our businesses.
In May 2018, we completed our $500 million 2017 Share Repurchase Program. On August 1, 2018, our board of directors increased our quarterly
cash dividend to $0.25 per share. Additionally, on August 1, 2018, our board of directors approved the 2018 Share Repurchase Program, which
authorizes us to purchase shares of our issued and outstanding common stock in an aggregate amount not to exceed $750 million, plus any fees or
costs in connection with our share repurchase activity. On February 13, 2019, our board of directors increased the authorization amount of the 2018
Share Repurchase Program to $1.0 billion. The 2018 Share Repurchase Program became effective on August 1, 2018 and will continue through the
earlier of its expiration on December 31, 2020, or the completion of repurchases up to the approved amount. To date, we have repurchased $572
million of our common stock under the 2018 Share Repurchase Program.
We anticipate making significant payments for interest, capital expenditures, environmental remediation costs and investments, dividends, and other
actions over the next 12 months, which we expect to fund through cash generated from operations, available cash, receivables securitization, and
borrowings. We further anticipate that our operations and existing debt financing arrangements will provide us with sufficient liquidity over the next 12
months. The availability under our revolving credit facility is subject to the last 12 months of consolidated EBITDA, as defined in the amended and
restated credit agreement, which is discussed further in “Note 20 – Debt” to the Consolidated Financial Statements.
At December 31, 2019, we had total cash and cash equivalents of $943 million, of which, $839 million was held by our foreign subsidiaries. All of the
cash and cash equivalents held by our foreign subsidiaries is readily convertible into currencies used in our operations, including the U.S. dollar. The
cash and earnings of our foreign subsidiaries are generally used to finance their operations and capital expenditures. At December 31, 2019,
management believed that sufficient liquidity was available in the U.S., which includes borrowing capacity under our revolving credit facility, and it is
our intention to indefinitely reinvest the historical pre-2018 earnings of our foreign subsidiaries. Beginning in 2018, management asserts that only
certain foreign subsidiaries are indefinitely reinvested. See “Note 9 – Income Taxes” to the Consolidated Financial Statements for further information
related to our income tax positions.
42
Cash Flows
The Chemours Company
The following table sets forth a summary of the net cash provided by (used for) our operating, investing, and financing activities for the years ended
December 31, 2019 and 2018.
(Dollars in millions)
Cash provided by operating activities
Cash used for investing activities
Cash used for financing activities
Operating Activities
$
Year Ended December 31,
2019
2018
$
650
(483)
(419)
1,140
(487)
(993)
We received $650 million and $1.1 billion in cash flows from our operating activities for the years ended December 31, 2019 and 2018, respectively.
The decrease in our operating cash inflows for the year ended December 31, 2019 was primarily attributable to a decrease in our net income,
despite reduction in our finished products inventories to align with decreased sales volumes during the year ended December 31, 2019 when
compared to the prior year. We also made cash payments for certain raw materials purchases that occurred during the fourth quarter of 2018.
Investing Activities
We used $483 million in cash flows for our investing activities during the year ended December 31, 2019. Our investing cash outflows for the year
ended December 31, 2019 were primarily attributable to purchases of property, plant, and equipment amounting to $481 million, as well as $10
million in total cash consideration payments for the acquisition of Southern Ionics Minerals, LLC. These investing cash outflows were partially offset
by proceeds from the sales of assets and businesses of $9 million, which were primarily attributable to $4 million received from the sale of our
Oakley, California site and $2 million received from the sale of our Methylamines and Methylamides business.
We used $487 million in cash flows for our investing activities during the year ended December 31, 2018. Our investing cash outflows for the year
ended December 31, 2018 were primarily attributable to purchases of property, plant, and equipment amounting to $498 million, and $37 million in
total cash consideration payments for the acquisition of ICOR International, Inc. These investing cash outflows were partially offset by proceeds from
the sales of assets and businesses of $46 million, which were primarily attributable to the sale of our Linden, New Jersey site for $39 million.
Financing Activities
We used $419 million in cash flows for our financing activities during the year ended December 31, 2019. Our financing cash outflows for the year
ended December 31, 2019 were primarily attributable to our capital allocation activities, resulting in $486 million of cash returned to shareholders
through our 2018 Share Repurchase Program and through cash dividends paid. In addition, we made $30 million in payments for withholding taxes
on certain of our vested stock-based compensation awards. We also drew $150 million on our revolving credit facility for general corporate purposes.
We subsequently repaid the revolver borrowing in full, primarily using the $125 million proceeds originally received from the Securitization Facility, as
well as available cash. During the year ended December 31, 2019, we also repaid a net $15 million of the borrowings from the Securitization Facility.
The Securitization Facility is further described in “Note 20 – Debt” to the Consolidated Financial Statements.
We used $993 million in cash flows for our financing activities during the year ended December 31, 2018. Our financing cash outflows for the year
ended December 31, 2018 were primarily attributable to the following: $679 million in debt repayments and $29 million in “make-whole” premium
payments in connection with our debt refinancing activities, as well as scheduled principal repayments; $644 million for purchases of our issued and
outstanding common stock under our share repurchase programs; and, $148 million for payments of cash dividends. These financing cash outflows
were partially offset by $520 million in net proceeds from the issuance of our euro-denominated 4.000% senior unsecured notes due May 2026.
43
Current Assets
The following table sets forth the components of our current assets at December 31, 2019 and 2018.
The Chemours Company
(Dollars in millions)
Cash and cash equivalents
Accounts and notes receivable, net
Inventories
Prepaid expenses and other
Total current assets
December 31,
2019
2018
943
674
1,079
81
2,777
$
$
1,201
861
1,147
84
3,293
$
$
Our accounts and notes receivable, net decreased by $187 million (or 22%) to $674 million at December 31, 2019, compared with accounts and
notes receivable, net of $861 million at December 31, 2018. The decrease in our accounts and notes receivable, net at December 31, 2019 was
primarily attributable to lower net sales in the fourth quarter of 2019 versus the same period in 2018, as well as the timing of payments from our
customers.
Our inventories decreased by $68 million (or 6%) to $1.1 billion at December 31, 2019, compared with inventories of $1.1 billion at December 31,
2018. The decrease in our inventories at December 31, 2019 was primarily attributable to a decrease in our finished products inventories, in order to
align with decreased sales volumes across all segments, and changes to our last-in, first-out inventory reserve balances. These decreases were
partially offset by an increase in our raw materials inventories, driven by the strategic acquisition of ore in our Titanium Technologies segment.
Our prepaid expenses and other assets were largely unchanged at $81 million and $84 million at December 31, 2019 and 2018, respectively.
Current Liabilities
The following table sets forth the components of our current liabilities at December 31, 2019 and 2018.
(Dollars in millions)
Accounts payable
Short-term and current maturities of long-term debt
Other accrued liabilities
Total current liabilities
December 31,
2019
2018
923
134
484
1,541
$
$
1,137
13
559
1,709
$
$
Our accounts payable decreased by $214 million (or 19%) to $923 million at December 31, 2019, compared with accounts payable of $1.1 billion at
December 31, 2018. The decrease in our accounts payable at December 31, 2019 was primarily attributable to our decline in net sales volumes
during the year ended December 31, 2019, as well as the timing of our inventory purchases in the fourth quarter of 2018.
Our short-term and current maturities of long-term debt increased by $121 million (or greater than 100%) to $134 million at December 31, 2019,
compared with short-term and current maturities of long-term debt of $13 million at December 31, 2018. The increase in our short-term and current
maturities of long-term debt at December 31, 2019 was primarily attributable to $110 million net borrowings under the Securitization Facility, $6
million for financed insurance premiums, and $5 million for the current portion of finance lease liabilities and financing obligations.
Our other accrued liabilities decreased by $75 million (or 13%) to $484 million at December 31, 2019, compared with other accrued liabilities of $559
million at December 31, 2018. The decrease in our other accrued liabilities at December 31, 2019 was primarily attributable to lower accrued
compensation and employee-related costs, payments of certain accrued expenses, and changes in the expected timing of payments related to
accrued environmental costs. These decreases were partially offset by balance sheet recognition of our operating lease liabilities upon the adoption
of the new leasing standard on January 1, 2019. As of December 31, 2019, the current portion of our operating lease liabilities amounted to $66
million.
Credit Facilities and Notes
See “Note 20 – Debt” to the Consolidated Financial Statements for a summary of our debt arrangements.
44
Supplier Financing
The Chemours Company
We maintain global paying services agreements with several financial institutions. Under these agreements, the financial institutions act as our
paying agents with respect to accounts payable due to our suppliers who elect to participate in the program. The agreements allow our suppliers to
sell their receivables to one of the participating financial institutions at the discretion of both parties on terms that are negotiated between the supplier
and the respective financial institution. Our obligations to our suppliers, including the amounts due and scheduled payment dates, are not impacted
by our suppliers’ decisions to sell their receivables under this program. At December 31, 2019 and 2018, the total payment instructions from us
amounted to $106 million and $210 million, respectively. Pursuant to their agreement with one of the financial institutions, certain suppliers may elect
to be paid early at their discretion. The available capacity under these programs can vary based on the number of investors and/or financial
institutions participating in these programs at any point in time.
Capital Expenditures
Our operations are capital intensive, requiring ongoing investment to upgrade or enhance existing operations and to meet environmental and
operational regulations. Our capital requirements have consisted, and are expected to continue to consist, primarily of:
•
•
•
ongoing capital expenditures, such as those required to maintain equipment reliability, the integrity and safety of our manufacturing sites,
and to comply with environmental regulations;
investments in our existing facilities to help support the introduction of new products and de-bottleneck to expand capacity and grow our
business; and,
investments in projects to reduce future operating costs and enhance productivity.
The following table sets forth our ongoing and expansion capital expenditures, including environmental capital expenditures, for the years ended
December 31, 2019 and 2018.
(Dollars in millions)
Fluoroproducts
Chemical Solutions
Titanium Technologies
Corporate and Other (1)
Total purchases of property, plant, and equipment
Year Ended December 31,
2019
2018
$
$
201
40
121
119
481
$
$
274
75
91
58
498
(1)
Includes $83 million and $41 million during the years ended December 31, 2019 and 2018, respectively, related to our capital expenditures for our new R&D facility on the
Science, Technology, and Advanced Research campus of the University of Delaware in Newark, Delaware (“Chemours Discovery Hub”).
Our capital expenditures decreased by $17 million (or 3%) to $481 million for the year ended December 31, 2019, compared with capital
expenditures of $498 million for the same period in 2018. Our capital expenditures for the year ended December 31, 2019 included the continued
construction and completion of our new R&D facility on the Science, Technology, and Advanced Research campus of the University of Delaware in
Newark, Delaware, as well as preparation of a new minerals sands mine site in Jesup, Georgia. We also invested in a thermal oxidizer to reduce
aerial PFAS emissions from Fayetteville, which is further discussed in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated
Financial Statements. These increases are more than offset by capital expenditures for the year ended December 31, 2018 that did not recur,
whether to the same magnitude or at all, in 2019. Such expenditures included the completion of our OpteonTM refrigerants plant in Corpus Christi,
Texas, as well as progress on our planned Mining Solutions plant in Mexico prior to its construction suspension, which is further discussed in “Note
22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements.
45
Contractual Obligations
The following table sets forth information related to our significant contractual obligations at December 31, 2019.
The Chemours Company
(Dollars in millions)
Long-term debt obligations (1)
Interest on long-term debt obligations (1)
Operating leases
Financing leases
Purchase obligations (2):
Raw materials
Utilities
Other
Total purchase obligations
Other liabilities:
Workers’ compensation (3)
Asset retirement obligations (3)
Environmental remediation (3)
Legal settlements (3)
Employee separation charges
Other (3)
Total other liabilities
Total contractual obligations
Total
2020
$
$
4,036
1,046
379
76
1,290
1,055
107
2,452
24
61
406
20
15
170
696
8,685
$
$
Payments Due In
2021 - 2022
26
$
401
115
16
2023 - 2024
934
$
309
64
16
$
303
162
30
495
5
21
111
6
—
18
161
1,214
$
257
153
13
423
4
11
86
5
—
21
127
1,873
$
$
2025 and
Beyond
2,954
133
118
35
570
627
—
1,197
12
22
135
5
—
104
278
4,715
122
203
82
9
160
113
64
337
3
7
74
4
15
27
130
883
(1)
(2)
To calculate payments due for principal and interest, we assumed that interest rates, foreign currency exchange rates, and outstanding borrowings under our credit facilities
were unchanged from December 31, 2019 through their dates of maturity.
Represents enforceable and legally-binding agreements to purchase goods and/or services that specify fixed or minimum quantities, fixed minimum or variable price
provisions, and the approximate timing of the agreement.
(3)
Represents reasonable estimates of future cash payments for our contractual obligations.
Off Balance Sheet Arrangements
Historically, we have not made significant payments to satisfy guarantee obligations; however, we believe we have the financial resources to satisfy
these guarantees in the event required.
46
Recent Accounting Pronouncements
The Chemours Company
See “Note 3 – Summary of Significant Accounting Policies” to the Consolidated Financial Statements for a summary of our recent accounting
pronouncements.
Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in “Note 3 – Summary of Significant Accounting Policies” to the Consolidated Financial
Statements. Management believes that the application of these policies on a consistent basis enables us to provide the users of our financial
statements with useful and reliable information about our operating results and financial condition.
The preparation of our consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts, including, but not limited to, receivable and inventory valuations, impairment of tangible and intangible assets, long-term
employee benefit obligations, income taxes, restructuring liabilities, environmental matters, and litigation. Management’s estimates are based on
historical experience, facts, and circumstances available at the time, and various other assumptions that are believed to be reasonable. We review
these matters and reflect changes in estimates as appropriate. Management believes that the following represents some of the more critical
judgment areas in the application of our accounting policies, which could have a material effect on our financial position, results of operations, or
cash flows.
Provision for (Benefit from) Income Taxes
The provision for (benefit from) income taxes is determined using the asset and liability approach of accounting for income taxes. Under this
approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered
or paid. The provision for (benefit from) income taxes represents income taxes paid or payable for the current year, plus the change in deferred taxes
during the year. Deferred taxes result from differences between the financial and tax bases of our assets and liabilities and are adjusted for changes
in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more-likely-than-not
that a tax benefit will not be realized. In evaluating the ability to realize deferred tax assets, we rely on, in order of increasing subjectivity, taxable
income in prior carryback years, the future reversals of existing taxable temporary differences, tax planning strategies, and forecasted taxable
income using historical and projected future operating results.
The breadth of our operations and the global complexity of tax regulations require assessments of uncertainties and judgments in estimating the
taxes that we will ultimately pay. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various
jurisdictions, outcomes of tax litigation, and resolutions of disputes arising from federal, state, and international tax audits in the normal course of
business. A liability for unrecognized tax benefits is recorded when management concludes that the likelihood of sustaining such positions upon
examination by taxing authorities is less than more-likely-than-not. It is our policy to include accrued interest related to unrecognized tax benefits in
other income (expense), net and income tax-related penalties in the provision for (benefit from) income taxes.
With respect to U.S. tax reform, while we have completed our analysis within the applicable measurement period, pursuant to Staff Accounting
Bulletin No. 118 as issued by the SEC, we account for the tax impacts of new provisions based on interpretation of existing statutory law, including
proposed regulations issued by the U.S. Treasury and the IRS. While there can be no assurances as to the effect of any final regulations on our
provision for (benefit from) income taxes, we will continue to evaluate the impacts as any issued regulations become final and adjust our estimates,
as appropriate.
See “Note 9 – Income Taxes” to the Consolidated Financial Statements for further information related to our income tax positions.
47
Long-lived Assets
The Chemours Company
We evaluate the carrying value of our long-lived assets to be held and used when events or changes in circumstances indicate that the carrying
value of an asset may not be recoverable. For the purposes of recognition or measurement of an impairment charge, the assessment is performed
on the asset or asset group at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets
and liabilities. To determine the level at which the assessment is performed, we consider factors such as revenue dependency, shared costs, and
the extent of vertical integration. The carrying value of a long-lived asset is considered impaired when the total projected undiscounted cash flows
from the use and eventual disposition of the asset or asset group are separately identifiable and are less than its carrying value. In that event, a loss
is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. The fair value methodology used is an
estimate of fair market value, which is made based on prices of similar assets or other valuation methodologies, including present value techniques.
Long-lived assets to be disposed of other than by sale are classified as held for use until their disposal. Long-lived assets to be disposed of by sale
are classified as held for sale and are reported at the lower of their carrying amount or fair market value, less the estimated costs to sell.
Depreciation is discontinued for any long-lived assets classified as held for sale.
The testing for potential impairment of these assets is significantly dependent on numerous assumptions and reflects management’s best estimates
at a particular point in time. The dynamic economic environments in which our segments operate, and key economic and business assumptions with
respect to projected selling prices, market growth, and inflation rates, can significantly impact the outcome of our impairment tests. Estimates based
on these assumptions may differ significantly from actual results. Changes in the factors and assumptions used in assessing potential impairments
can have a significant impact on the existence and magnitude of impairments, as well as the time in which such impairments are recognized. In
addition, we continually review our diverse portfolio of assets to ensure that they are achieving their greatest potential and are aligned with our
growth strategy. Strategic decisions involving a particular group of assets may trigger an assessment of the recoverability of the related assets. Such
an assessment could result in impairment losses.
No impairment charges were recognized on our long-lived assets during the years ended December 31, 2019 and 2018.
Goodwill
The excess of the purchase price over the estimated fair value of the net assets acquired in a business combination, including any identified
intangible assets, is recorded as goodwill. We test our goodwill for impairment at least annually 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 an operating segment, or one level below an operating segment. A reporting unit is the level at which discrete
financial information is available and reviewed by business management on a regular basis. An impairment exists when the carrying value of a
reporting unit exceeds its fair value. The amount of impairment loss recognized in the consolidated statements of operations is equal to the excess of
a reporting unit’s carrying value over its fair value, which is limited to the total amount of goodwill allocated to the reporting unit.
The fair values of our reporting units were determined by using a combination of income-based and/or market-based valuation techniques. These
valuation models incorporated a number of assumptions and judgments surrounding general market and economic conditions, short and long-term
revenue growth rates, gross margins and prospective financial information surrounding future reporting unit cash flows. Projections are based on
internal forecasts of future business performance and are based on growth assumptions which exclude business growth opportunities not yet fully
realized. Discount rate and market multiple assumptions were determined based on relevant peer companies in the chemicals sector.
As of October 1, 2019, we performed our annual goodwill impairment tests for all reporting units. Based upon the results of our annual goodwill
impairment tests, no adjustments to the carrying value of goodwill were necessary during the year ended December 31, 2019.
The estimated fair value of the Fluoropolymers reporting unit was determined by utilizing a discount rate of 9.84% and a market multiple of 7.3 times
Adjusted EBITDA, resulting in an estimated fair value 30% higher than its carrying value. Fluoropolymers has $56 million of goodwill. Changing the
weighting of the market and income approaches used for Fluoropolymers could result in a maximum reduction of the excess of estimated fair value
over carrying value to 17%. Assuming all other factors remain the same, a 200-basis point increase in the discount rate would decrease the excess
of estimated fair value over carrying value to 17%; a 1% decrease in the long-term growth rate would decrease the excess of estimated fair value
over carrying value to 24%; and, a 15% decrease in the market multiple assumption would decrease the excess of estimated fair value over carrying
value to 20%. Under each of these sensitivity scenarios, the Fluoropolymers reporting unit's fair value exceeded its carrying value.
The estimated fair value of the Mining Solutions reporting unit was determined by utilizing a discount rate of 11.09%, resulting in an estimated fair
value 17% higher than its carrying value. Mining Solutions has $51 million of goodwill. Assuming all other factors remain the same, it would take
more than a 110-basis point increase in the discount rate to cause the estimated fair value to fall below the unit’s carrying value; and, a 1% decrease
in the long-term growth rate would decrease the excess of estimated fair value over carrying value to 5%.
48
The Chemours Company
Our determination of the fair value of the Mining Solutions reporting unit considered further delays and additional costs of construction for our new
Mining Solutions facility under construction in Gomez Palacio, Durango, Mexico. The construction-in-process for this facility represents a significant
portion of the total carrying value of Mining Solutions, and, in the event that the facility was unable to be completed, the impairment of the related
long-lived assets would significantly decrease the carrying value of the reporting unit. As a result, an impairment of the reporting unit’s goodwill would
become less likely.
Employee Benefits
The amounts recognized in our consolidated financial statements related to pension and other long-term employee benefits plans are determined
from actuarial valuations. Inherent in these valuations are assumptions including, but not limited to, the expected returns on plan assets, discount
rates at which liabilities are expected to be settled, rates of increase in future compensation levels, and mortality rates. These assumptions are
updated annually and are disclosed in “Note 27 – Long-term Employee Benefits” to the Consolidated Financial Statements. In accordance with
GAAP, actual results that differed from the assumptions are accumulated and amortized over future periods and therefore, affect expense
recognized and obligations recorded in future periods.
We use discount rates that are developed by matching the expected cash flows of each benefit plan to various yield curves constructed from a
portfolio of high-quality, fixed income instruments provided by the plan’s actuary as of the measurement date. As of December 31, 2019, the
weighted-average discount rate was 1.4%.
The expected long-term rates of return on plan assets are determined by performing a detailed analysis of historical and expected returns based on
the strategic asset allocation of the underlying asset class applicable to each country. We also consider our historical experience with the pension
funds’ asset performance. The expected long-term rates of return on plan assets are assumptions and not what is expected to be earned in any one
particular year. The weighted-average long-term rates of return on plan assets assumptions used for determining our net periodic pension expense
for 2019 was 4.1%.
A 50 basis point increase in the discount rate would result in a decrease of $4 million to the net periodic benefit cost for 2020, while a 50 basis point
decrease in the discount rate would result in an increase of approximately $5 million. A 50 basis point increase in the expected return on plan assets
assumption would result in a decrease of approximately $3 million to the net periodic benefit cost for 2020, while a 50 basis point decrease in the
expected return on plan assets assumption would result in an increase of approximately $3 million.
In the fourth quarter of 2019, we, through our wholly-owned subsidiary Chemours Netherlands B.V., completed a settlement transaction related to a
significant portion of our Netherlands pension plan. We transferred the future risk and administration associated with the $932 million of inactive
participants’ vested pension benefits to a third-party asset management company in the Netherlands. The irrevocability of the transaction was
contingent upon non-objection by the Dutch National Bank, which was received in October 2019. Following the receipt of non-objection, the
responsibility for the associated pension obligation was transferred to the third-party asset management company in December 2019, thereby
eliminating our exposure to the pension liabilities and formally effecting the settlement. At the time of settlement, a remeasurement of plan assets
and projected benefit obligations was performed, resulting in a $158 million decrease to net pension assets and increase to accumulated other
comprehensive loss on the consolidated balance sheet. The cumulative loss associated with the inactive participants’ vested pension benefits was
then immediately reclassified from accumulated other comprehensive loss and recognized in earnings, resulting in a charge of $380 million
recognized in other expense, net in the consolidated statements of operations. At December 31, 2019, the projected benefit obligations associated
with the plan’s active employees remained on our consolidated balance sheet.
Litigation
We accrue for litigation matters when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated.
Litigation liabilities and expenditures included in our consolidated financial statements include litigation matters that are liabilities of DuPont and its
subsidiaries, which we may be required to indemnify pursuant to the Separation-related agreements executed prior to the Separation. Disputes
between us and DuPont may arise with respect to indemnification of these matters, including disputes based on matters of law or contract
interpretation. If, and to the extent these disputes arise, they could materially adversely affect our results of operations. Legal costs such as outside
counsel fees and expenses are charged to expense in the period services are received.
49
Environmental Liabilities and Expenditures
The Chemours Company
We accrue for environmental remediation costs when it is probable that a liability has been incurred and a reasonable estimate of the liability can be
made. Where the available information is sufficient to estimate the amount of liability, that estimate has been used. Where the information is only
sufficient to establish a range of probable liability, and no point within the range is more likely than any other, the lower end of the range has been
used. Estimated liabilities are determined based on existing remediation laws and technologies and our planned remedial responses, which are
derived from in-depth environmental studies, sampling, testing, and other analyses. Inherent uncertainties exist in such evaluations, primarily due to
unknown environmental conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation
technologies. These accruals are adjusted periodically as remediation efforts progress and as additional technology, regulatory, and legal
information become available.
Environmental liabilities and expenditures include claims for matters that are liabilities of DuPont and its subsidiaries, which we may be required to
indemnify pursuant to the Separation-related agreements executed prior to the Separation. Accrued liabilities are undiscounted and do not include
claims against third parties.
Costs related to environmental remediation are charged to expense in the period that the associated liability is accrued. Other environmental costs
are also charged to expense in the period incurred, unless they increase the value of the property or reduce or prevent contamination from future
operations, in which case, they are capitalized and amortized.
Environmental Matters
Consistent with our values and our Environment, Health, Safety, and Corporate Responsibility policy, we are committed to preventing releases to the
environment at our manufacturing sites to keep our people and communities safe, and to be good stewards of the environment. We are also subject
to environmental laws and regulations relating to the protection of the environment. We believe that, as a general matter, our policies, standards, and
procedures are properly designed to prevent unreasonable risk of harm to people and the environment, and that our handling, manufacture, use, and
disposal of hazardous substances are in accordance with applicable environmental laws and regulations.
Environmental Expenditures
We incur costs for pollution abatement activities including waste collection and disposal, installation and maintenance of air pollution controls and
waste water treatment, emissions testing and monitoring, and obtaining permits. Annual expenses charged to current operations include
environmental operating costs and increases in remediation accruals (further described below), if any, during the period reported.
The charges described in this section include $201 million accrued for costs associated with the proposed Consent Order between us and the NC
DEQ, which is further described in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements. These accrued
liabilities represent on-site remediation, off-site groundwater remediation, and toxicology studies related to Fayetteville.
Our environmental remediation expenditures are subject to considerable uncertainty and may fluctuate significantly. In the U.S., additional capital
expenditures associated with ongoing operations (further described below) are expected to be required over the next decade for treatment, storage,
and disposal facilities for solid and hazardous waste and for compliance with the Clean Air Act (“CAA”). Until all CAA regulatory requirements are
established and known, considerable uncertainty will remain regarding estimates for our future capital and remediation expenditures.
Environmental Capital Expenditures
For the years ended December 31, 2019, 2018, and 2017, we spent $101 million, $57 million, and $15 million, respectively, on environmental capital
projects that were either required by law or necessary to meet our internal environmental objectives. The increases in our environmental capital
expenditures for the years ended December 31, 2019 and 2018 when compared with the same period in 2017 were primarily attributable to new
capital projects at Fayetteville. We expect further increases in these capital expenditures over the near-term, while in the longer-term, our capital
expenditures for environmental matters will vary based on the success of our deployed solutions, changes in our operations, technological
advancements, developments in environmental requirements, and stakeholder expectations.
50
Environmental Remediation
The Chemours Company
In large part, because of past operations, operations of predecessor companies, or past disposal practices, we, like many other similar companies,
have clean-up responsibilities and associated remediation costs, and are subject to claims by other parties, including claims for matters that are
liabilities of DuPont and its subsidiaries that we may be required to indemnify pursuant to the separation-related agreements executed prior to the
Separation.
We accrue for clean-up activities consistent with the policy described under “Critical Accounting Policies and Estimates” within this MD&A and in
“Note 3 – Summary of Significant Accounting Policies” to the Consolidated Financial Statements. Our environmental liabilities include estimated
costs, including certain accruable costs associated with on-site capital projects, related to a number of sites for which it is probable that
environmental remediation will be required, whether or not subject to enforcement activities, as well as those obligations that result from
environmental laws such as the CERCLA, RCRA, and similar federal, state, local, and foreign laws. These laws require certain investigative,
remediation, and restoration activities at sites where we conduct or once conducted operations or at sites where our generated waste was disposed.
At December 31, 2019 and 2018, our consolidated balance sheets included environmental remediation liabilities of $406 million and $291 million,
respectively, relating to these matters, which, as discussed in further detail below, included $201 million and $75 million, respectively, for
Fayetteville.
The following table sets forth the activities in our remediation accruals for the years ended December 31, 2019 and 2018.
(Dollars in millions)
Balance at January 1,
Increase in remediation accrual
Remediation payments
Balance at December 31,
December 31,
2019
2018
291
200
(85)
406
$
$
253
101
(63)
291
$
$
Our estimated liability for environmental remediation covered 211 sites at December 31, 2019 and 2018.
The following table sets forth our estimated environmental liability by site category.
(Dollars in millions)
Site category
Chemours-owned (1)
Multi-party Superfund/non-owned (2)
Closed or settled
Total sites
December 31, 2019
December 31, 2018
Number of Sites
Remediation
Accrual
Number of Sites
Remediation
Accrual
25
86
100
211
$
$
327
79
—
406
25
86
100
211
$
$
204
87
—
291
(1)
(2)
Includes remediation accrual of divested or sold sites where certain environmental obligations were retained by us in accordance with the related sale agreements.
Sites not owned by us, including sites previously owned by DuPont and sites owned by a third party, where remediation obligations are imposed by Superfund laws such as
CERCLA or similar state laws.
As part of our legacy as a former subsidiary of DuPont, we are cleaning-up historical impacts to soil and groundwater that have occurred in the past
at the 25 sites that we own. These operating and former operating sites make up approximately 80% of our remediation liabilities at December 31,
2019.
We were also assigned numerous clean-up obligations from DuPont, which pertain to 86 sites previously owned by DuPont and sites that we or
DuPont never owned or operated. We are meeting our obligations to clean up those sites. The majority of these never-owned sites are multi-party
Superfund sites that we, through DuPont, have been notified of potential liability under CERCLA or similar state laws and which, in some cases, may
represent a small fraction of the total waste that was allegedly disposed of at a site. These sites represent approximately 20% of our remediation
liabilities at December 31, 2019. Included in the 86 sites are 36 inactive sites for which there has been no known investigation, clean-up, or
monitoring activity, and no remediation obligation is imposed or required; as such, no remediation liabilities are recorded.
The remaining 100 sites, which are Superfund sites and other sites not owned by us, are either already closed or settled, or sites for which we do not
believe we have clean-up responsibility based on current information.
With the exception of Fayetteville, our remediation portfolio is relatively mature, with many sites under active clean-up moving towards final
completion.
51
The Chemours Company
The following graph sets forth the number of remediation sites by site clean-up phase and our remediation liabilities by site clean-up phase as of
December 31, 2019 and 2018.
(1)
(2)
(3)
Number of sites does not include the 36 inactive sites for which there has been no known investigation, clean-up, or monitoring activities as of December 31, 2019 and 2018.
Dollars in millions.
As of December 31, 2019, related to Fayetteville, Investigation included $155 million for on-site remediation, and Active Remediation included $46 million for off-site
groundwater remediation. As of December 31, 2018, Investigation included $75 million related to Fayetteville.
As remediation efforts progress, sites move from the investigation phase (“Investigation”) to the active clean-up phase (“Active Remediation”), and as
construction is completed at Active Remediation sites, those sites move to the operation, maintenance, and monitoring (“OM&M”), or closure phase.
As final clean-up activities for some significant sites are completed over the next several years, we expect our annual expenses related to these
active sites to decline over time. The time frame for a site to go through all phases of remediation (Investigation and Active Remediation) may take
about 15 to 20 years, followed by several years of OM&M activities. Remediation activities, including OM&M activities, vary substantially in duration
and cost from site to site. These activities, and their associated costs, depend on the mix of unique site characteristics, evolving remediation
technologies, and diverse regulatory requirements, as well as the presence or absence of other Potentially Responsible Parties (“PRPs”). In addition,
for claims that we may be required to indemnify DuPont pursuant to the separation-related agreements, we and DuPont may have limited available
information for certain sites or are in the early stages of discussions with regulators. For these sites, there may be considerable variability between
the clean-up activities that are currently being undertaken or planned and the ultimate actions that could be required. Therefore, considerable
uncertainty exists with respect to environmental remediation costs, and, under adverse changes in circumstances, although deemed remote, the
potential liability may range up to approximately $530 million above the amount accrued at December 31, 2019. In general, uncertainty is greatest
and the range of potential liability is widest in the Investigation phase, narrowing over time as regulatory agencies approve site remedial plans. As a
result, uncertainty is reduced, and sites ultimately move into OM&M, as needed. As more sites advance from Investigation to Active Remediation to
OM&M or closure, the upper end of the range of potential liability is expected to decrease over time.
Some remediation sites will achieve site closure and will require no further action to protect people and the environment and comply with laws and
regulations. At certain sites, we expect that there will continue to be some level of remediation activity due to ongoing OM&M of remedial systems. In
addition, portfolio changes, such as an acquisition or divestiture, or notification as a PRP for a multi-party Superfund site, could result in additional
remediation activity and potentially additional accrual.
Management does not believe that any loss, in excess of amounts accrued, related to remediation activities at any individual site will have a material
impact on our financial position or cash flows for any given year, as such obligation can be satisfied or settled over many years.
52
Significant Environmental Remediation Sites
The Chemours Company
While there are many remediation sites that contribute to our total accrued environmental remediation liabilities at December 31, 2019 and 2018, the
following table sets forth the sites that are the most significant.
(Dollars in millions)
Chambers Works, Deepwater, New Jersey
East Chicago, Indiana
Fayetteville Works, Fayetteville, North Carolina
Pompton Lakes, New Jersey
USS Lead, East Chicago, Indiana
All other sites
Total accrued environmental remediation
December 31,
2019
2018
$
$
20
17
201
43
13
112
406
$
$
18
21
75
45
15
117
291
The five sites listed above represent 72% and 60% of our total accrued environmental remediation liabilities at December 31, 2019 and 2018,
respectively. For these five sites, we expect to spend, in the aggregate, $115 million over the next three years. For all other sites, we expect to spend
$68 million over the next three years.
Chambers Works, 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, chlorofluorocarbons, and tetraethyl lead. We
continue to manufacture a variety of fluorochemicals and finished products at Chambers Works. In addition, three tenants operate processes at
Chambers Works including steam/electricity generation, industrial gas production, and the manufacture of intermediate chemicals. As a result of over
100 years of continuous industrial activity, site soils and groundwater have been impacted by chemical releases.
In response to identified groundwater contamination, a groundwater interceptor well system (“IWS”) was installed in 1970, which was designed to
contain contaminated groundwater and restrict off-site migration. Additional remediation is being completed under a federal RCRA Corrective Action
permit. The site has been studied extensively over the years, and more than 25 remedial actions have been completed to date and engineering and
institutional controls put in place to ensure protection of people and the environment. In the fourth quarter of 2017, a site perimeter sheet pile barrier
intended to more efficiently contain groundwater was completed.
Remaining work beyond continued operation of the IWS and groundwater monitoring includes completion of various targeted studies on site and in
adjacent water bodies to close investigation data gaps, as well as selection and implementation of final remedies under RCRA Corrective Action for
various solid waste management units and areas of concern not yet addressed through interim measures.
East Chicago, Indiana
East Chicago is a former manufacturing facility that we previously owned in East Chicago, Lake County, Indiana. The approximate 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. The remaining business was sold to W.R. Grace Company (“Grace”) in early 2000. Approximately 172 acres of the
site were never developed and are managed 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 the U.S. Environmental Protection Agency (“EPA”).
The EPA eventually issued an Administrative Order on Consent for the site in 1997. The order specified that remediation work be performed under
RCRA Corrective Action authority. Work has proceeded under the RCRA Corrective Action process since that time.
53
The Chemours Company
Subsequent investigations included the preparation of initial environmental site assessments and multiple phases of investigation. In 2002, as an
interim remedial measure, two 2,000-foot long permeable reactive barrier treatment walls were installed along the northern property boundary to
address migration of chemicals in groundwater. Since that time, the investigation process has been completed and approved by the EPA, and the
final remedy for the site was issued by the EPA in July 2018.
On June 29, 2018, we sold the East Chicago, Indiana site to a third party for $1 million. In connection with the sale, the buyer agreed to assume all
costs associated with environmental remediation activities at the site in excess of $21 million, which will remain our responsibility. At the time of the
sale, we had accrued the full $21 million, of which $17 million remained as of December 31, 2019. We will reimburse the buyer through a series of
progress payments to be made at defined intervals as certain tasks are completed.
Fayetteville Works, Fayetteville, North Carolina
Fayetteville is located southeast of the City of Fayetteville in Cumberland and Bladen counties, North Carolina. The facility encompasses
approximately 2,200 acres, which were purchased by DuPont in 1970, and are bounded to the east by the Cape Fear River and to the west by North
Carolina Highway 87. Currently, the site manufactures plastic sheeting, fluorochemicals, and intermediates for plastics manufacturing. A former
manufacturing area, which was sold in 1992, produced nylon strapping and elastomeric tape. DuPont sold its Butacite® and SentryGlas®
manufacturing units to Kuraray America, Inc. in September 2014. In July 2015, upon our separation from DuPont, we became the owner of the
Fayetteville land assets along with fluoromonomers, Nafion® membranes, and the related polymer processing aid manufacturing units. A polyvinyl
fluoride resin manufacturing unit remained with DuPont.
Beginning in 1996, several stages of site investigation were conducted under NC DEQ oversight, as required by the facility's hazardous waste
permit. In addition, the site has voluntarily agreed to agency requests for additional investigations of the potential release of “PFAS” (perfluoroalkyl
and polyfluoroalkyl substances) beginning with “PFOA” (collectively, perfluorooctanoic acids and its salts, including the ammonium salt) in 2006. As a
result of detection of the polymerization processing aid hexafluoropropylene oxide dimer acid (“HFPO Dimer Acid,” sometimes referred to as “GenX”
or “C3 Dimer Acid”) in on-site groundwater wells during our investigations in 2017, the NC DEQ issued a Notice of Violation (“NOV”) on September
6, 2017 alleging violations of North Carolina water quality statutes and requiring further response. Since that time, and in response to three additional
NOVs issued by NC DEQ and pursuant to the Consent Order (as discussed below), we have worked cooperatively with the agency to investigate
and address releases of PFAS to on-site and off-site groundwater and surface water.
As discussed in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements, as well as “Recent Developments”
within this MD&A, we and the NC DEQ have filed a final Consent Order that comprehensively addressed various issues, NOVs, and court filings
made by the NC DEQ regarding Fayetteville and resolved litigations filed by the NC DEQ and Cape Fear River Watch, a non-profit organization. In
connection with the Consent Order, a thermal oxidizer became fully operational at the site in December 2019 to reduce aerial PFAS emissions from
Fayetteville.
In the fourth quarter of 2019, we completed and submitted our Cape Fear River PFAS Loading Reduction Plan - Supplemental Information Report
and CAP to NC DEQ. The Supplemental Information Report provides information to support the evaluation of potential remedial options to reduce
PFAS loadings to surface waters, including interim alternatives. The CAP describes potential remediation activities to address PFAS in on-site
groundwater and surface waters at the site, in accordance with the requirements of the Consent Order and the North Carolina groundwater
standards, and builds on the previous submissions to NC DEQ. The NC DEQ has made the CAP available for public review and comment until
March 6, 2020.
In the fourth quarter of 2019, based on the Consent Order, CAP, and our plans, we accrued an additional $132 million related to the estimated cost
of on-site remediation.
Pompton Lakes, New Jersey
During the 20th century, blasting caps, fuses, and related materials were manufactured at Pompton Lakes, Passaic County, New Jersey. Operating
activities at the site were ceased in the mid-1990s. The primary contaminants in the soil and sediments are lead and mercury. Groundwater
contaminants include volatile organic compounds. Under the authority of the EPA and the New Jersey Department of Environmental Protection (“NJ
DEP”), remedial actions at the site are focused on investigating and cleaning-up the area. Groundwater monitoring at the site is ongoing, and we
have installed and continue to install vapor mitigation systems at residences within the groundwater plume. In addition, we are further assessing
groundwater conditions. In September 2015, the EPA issued a modification to the site’s RCRA permit that requires us to dredge mercury
contamination from a 36-acre area of the lake and remove sediment from two other areas of the lake near the shoreline. The remediation activities
commenced when permits and implementation plans were approved in May 2016, and work on the lake dredging project is now complete. In April
2019, Chemours submitted a revised Corrective Measures Study (“CMS”) proposing actions to address on-site soils impacted from past operations
that exceed applicable clean-up criteria. That CMS is currently under review by EPA and NJ DEP.
54
U.S. Smelter and Lead Refinery, Inc., East Chicago, Indiana
The Chemours Company
The U.S. Smelter and Lead Refinery, Inc. (“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 EPA is directing and organizing remediation on this site, and
we are 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 us in the separation agreement.
The USS Lead Superfund site was listed on the National Priorities List in 2009. To facilitate negotiations with PRPs, the 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. (“Atlantic Richfield”) and DuPont entering into an agreement in 2014 with the EPA and the State of Indiana to reimburse the EPA’s
costs to implement clean-up in Zone 1 and Zone 3. More recently, in March 2017, we and three other parties – Atlantic Richfield, DuPont, and the
U.S. Metals Refining Co. (“US Metals”) – entered into an administrative order on consent to reimburse the EPA’s costs to clean-up a portion of Zone
2. In March 2018, the EPA issued a Unilateral Administrative Order for the remainder of the Zone 2 work to five parties, including us, Atlantic
Richfield, DuPont, U.S. Metals, and USS Lead Muller Group, and these parties entered into an interim allocation agreement to perform that work. As
of the end of 2019, the required work in Zone 3 has been completed, and Zone 2 is nearly complete. There is uncertainty as to whether these parties
will be able to agree on a final allocation for Zone 2 and/or the other Zones, and whether any additional PRPs may be identified.
The environmental accrual for USS Lead continues to include completion of the remaining obligations under the 2012 Record of Decision (“ROD”)
and Statement of Work, which principally encompasses completion of Zone 1. The EPA released a proposed amendment to the 2012 ROD for a
portion of Zone 1 in December 2018 (following its August 2018 Feasibility Study Addendum), with its recommended option based on future
residential use. However, the proposed amendment was sent out for public comment with the EPA’s statement that the remedy basis and cost may
change based on community input on future land use. The EPA’s final decision was expected in 2019, but has not yet been released. We expect that
our future costs for Zone 1 will be contingent on this remedy decision, as well as any final allocation between PRPs.
New Jersey Department of Environmental Protection Directives and Litigation
In March 2019, the NJ DEP issued two Directives and filed four lawsuits against Chemours and other defendants. Further discussion related to these
matters is included in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements.
Climate Change
In 2018, we issued our inaugural Corporate Responsibility Commitment (“CRC”) Report, which expresses our corporate responsibility commitment –
an extension of our growth strategy – as 10 ambitious goals targeted for completion by 2030. Built on the pillars of Inspired People, Shared Planet,
and an Evolved Portfolio, our Shared Planet pillar underlines our commitment to deliver essential solutions responsibly, without causing harm to the
Earth. With a focus on the responsible treatment of climate, water, and waste, our Shared Planet goals are comprised of the following:
•
•
•
•
Reduce greenhouse gas (“GHG”) emissions intensity by 60%;
Advance our plan to become carbon positive by 2050;
Reduce air and water process emissions of fluorinated organic chemicals by 99% or more; and,
Reduce our landfill volume intensity by 70%.
We are committed to improving our resource efficiency, to acting on opportunities to reduce our GHG emissions, to enhancing the eco-efficiency of
our supply chain, and to encouraging our employees to reduce their own environmental footprints. We understand that maintaining safe, sustainable
operations has an impact on us, our communities, the environment, and our collective future. We continue to invest in R&D to develop safer, cleaner,
and more efficient products and processes that help our customers and consumers reduce both their GHGs and their overall environmental footprint.
We value collaboration to drive change and commit to working with policymakers, our value chain, and other organizations to encourage collective
action for reducing GHGs.
PFOA
See our discussion under the heading “PFOA” in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements.
55
GenX
The Chemours Company
On June 26, 2019 the Member States Committee of the European Chemicals Agency (“ECHA”) voted to list HFPO Dimer Acid as a Substance of Very
High Concern. The vote was based on Article 57(f) – equivalent level of concern having probable serious effects to the environment. This identification
does not impose immediate regulatory restriction or obligations, but may lead to a future authorization or restriction of the substance. On September 24,
2019, Chemours filed an application with the EU Court of Justice for the annulment of the decision of ECHA to list HFPO Dimer Acid as a Substance of
Very High Concern.
Delaware Chancery Court Lawsuit
In May 2019, we filed a lawsuit in Delaware Chancery Court (“Chancery Court”) against DowDuPont, Inc., Corteva, Inc., and DuPont concerning
DuPont’s contention that it is entitled to unlimited indemnity from us for specified liabilities that DuPont assigned to us in the spin-off. The lawsuit
requests that the Chancery Court enter a declaratory judgment limiting DuPont’s indemnification rights against us and the transfer of liabilities to us
to the actual “high-end (maximum) realistic exposures” it stated in connection with the spin-off, or, in the alternative, requiring the return of the
approximate $4 billion dividend DuPont extracted from us in connection with the spin-off. In response, DuPont has filed a Motion to Dismiss the
lawsuit seeking to have the dispute heard in a non-public arbitration rather than the Chancery Court. Many of the potential litigation liabilities
discussed in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements are at issue in the lawsuit.
56
Non-GAAP Financial Measures
The Chemours Company
We prepare our consolidated financial statements in accordance with GAAP. To supplement our financial information presented in accordance with
GAAP, we provide the following non-GAAP financial measures – Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings per Share (“EPS”),
Free Cash Flows (“FCF”), and Return on Invested Capital (“ROIC”) – in order to clarify and provide investors with a better understanding of our
performance when analyzing changes in our underlying business between reporting periods and provide for greater transparency with respect to
supplemental information used by management in its financial and operational decision-making. We utilize Adjusted EBITDA as the primary measure
of segment profitability used by our CODM.
Adjusted EBITDA is defined as income (loss) before income taxes, excluding the following:
•
•
•
•
•
•
•
interest expense, depreciation, and amortization;
non-operating pension and other post-retirement employee benefit costs, which represents the components of net periodic pension
(income) costs excluding the service cost component;
exchange (gains) losses included in other income (expense), net;
restructuring, asset-related, and other charges;
asset impairments;
(gains) losses on sales of business or assets; and,
other items not considered indicative of our ongoing operational performance and expected to occur infrequently.
Adjusted Net Income is defined as our net income or loss, adjusted for items excluded from Adjusted EBITDA, except interest expense, depreciation,
amortization, and certain provision for (benefit from) income tax amounts. Adjusted EPS is presented on a diluted basis and is calculated by dividing
Adjusted Net Income by the weighted-average number of our common shares outstanding, accounting for the dilutive impact of our stock-based
compensation awards. FCF is defined as our cash flows provided by (used for) operating activities, less purchases of property, plant, and equipment
as shown in our consolidated statements of cash flows. ROIC is defined as Adjusted Earnings before Interest and Taxes (“EBIT”), divided by the
average of our invested capital, which amounts to net debt plus equity.
We believe the presentation of these non-GAAP financial measures, when used in conjunction with GAAP financial measures, is a useful financial
analysis tool that can assist investors in assessing our operating performance and underlying prospects. This analysis should not be considered in
isolation or as a substitute for analysis of our results as reported under GAAP. In the future, we may incur expenses similar to those eliminated in this
presentation. Our presentation of Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, FCF, and ROIC should not be construed as an inference
that our future results will be unaffected by unusual or infrequently occurring items. The non-GAAP financial measures we use may be defined
differently from measures with the same or similar names used by other companies. This analysis, as well as the other information provided in this
Annual Report on Form 10-K, should be read in conjunction with the Consolidated Financial Statements and notes thereto included in this report.
57
The following table sets forth a reconciliation of Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS to our net income (loss) attributable to
Chemours for the years ended December 31, 2019 and 2018.
The Chemours Company
(Dollars in millions, except per share amounts)
Net (loss) income attributable to Chemours
Non-operating pension and other post-retirement employee benefit cost (income) (1)
Exchange losses (gains), net
Restructuring, asset-related, and other charges (2)
Loss on extinguishment of debt
Gain on sales of assets and businesses (3)
Transaction costs (4)
Legal and environmental charges (5)
Other charges
Adjustments made to income taxes (6)
Benefit from income taxes relating to reconciling items (7)
Adjusted Net Income
Net income attributable to non-controlling interests
Interest expense, net
Depreciation and amortization
All remaining provision for income taxes
Adjusted EBITDA
Weighted-average number of common shares outstanding - basic
Dilutive effect of our employee compensation plans (8)
Weighted-average number of common shares outstanding - diluted (8)
Per share data
Basic (loss) earnings per share of common stock
Diluted (loss) earnings per share of common stock (8)
Adjusted basic earnings per share of common stock
Adjusted diluted earnings per share of common stock (8)
$
$
$
Year Ended December 31,
2019
2018
(52)
368
2
87
—
(10)
3
175
—
—
(154)
419
—
208
311
82
1,020
$
$
995
(27)
(1)
49
38
(45)
9
82
1
(41)
(26)
1,034
1
195
284
226
1,740
164,816,839
2,428,184
167,245,023
176,968,554
5,603,467
182,572,021
$
(0.32)
(0.32)
2.54
2.51
5.62
5.45
5.85
5.67
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
The year ended December 31, 2019 includes a $380 million settlement loss related to a significant portion of our Netherlands pension plan, specific to the vested pension
benefits of the inactive participants. See “Note 27 – Long-term Employee Benefits” to the Consolidated Financial Statements for further details.
Includes restructuring, asset-related, and other charges, which are discussed in further detail in “Note 7 – Restructuring, Asset-related, and Other Charges” to the
Consolidated Financial Statements.
The year ended December 31, 2019 included a non-cash gain of $9 million related to the sale of the Company’s Repauno, New Jersey site. The year ended December 31,
2018 included gains of $3 million and $42 million associated with the sales of our East Chicago, Indiana and Linden, New Jersey sites, respectively.
Includes costs associated with our debt transactions, as well as accounting, legal, and bankers’ transaction costs incurred in connection with our strategic initiatives.
Legal charges pertains to litigation settlements, PFOA drinking water treatment accruals, and other legal charges. Environmental charges pertains to estimated liabilities
associated with on-site remediation, off-site groundwater remediation, and toxicology studies related to Fayetteville. The year ended December 31, 2019 included $168
million in additional charges for the approved final Consent Order associated with certain matters at Fayetteville. The year ended December 31, 2018 included $63 million in
additional charges for the estimated liability associated with Fayetteville. See “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements
for further detail.
Includes the removal of certain discrete income tax impacts within our provision for income taxes, such as the benefit from windfalls on our share-based payments, historical
valuation allowance adjustments, unrealized gains and losses on foreign exchange rate changes, and other discrete income tax items.
The income tax impacts included in this caption are determined using the applicable rates in the taxing jurisdictions in which income or expense occurred and represents
both current and deferred income tax expense or benefit based on the nature of the non-GAAP financial measure.
In periods where the Company incurs a net loss, the impact of potentially dilutive securities is excluded from the calculation of EPS under GAAP, as its inclusion would have
an anti-dilutive effect. As such, with respect to the GAAP measure of diluted EPS, the impact of potentially dilutive securities is excluded from our calculation for the year
ended December 31, 2019. With respect to the non-GAAP measure of adjusted diluted EPS, the impact of potentially dilutive securities is included in our calculation for both
of the periods presented above, as Adjusted Net Income was in a net income position for the years ended December 31, 2019 and 2018.
58
The Chemours Company
The following table sets forth a reconciliation of FCF to our cash flows provided by operating activities for the years ended December 31, 2019 and
2018.
(Dollars in millions)
Cash flows provided by operating activities
Less: Purchases of property, plant, and equipment
Free Cash Flows
Year Ended December 31,
2019
2018
$
$
650
(481)
169
$
$
1,140
(498)
642
The following table sets forth a reconciliation of invested capital, net, a component of ROIC, to our total debt, equity, and cash and cash equivalents
amounts for the years ended December 31, 2019 and 2018.
(Dollars in millions)
Adjusted EBITDA (1)
Less: Depreciation and amortization
Adjusted EBIT
Total debt
Total equity
Less: Cash and cash equivalents
Invested capital, net
Average invested capital (2)
Return on Invested Capital
$
$
$
Year Ended December 31,
2019
2018
1,020
(311)
709
4,160
695
(943)
3,912
$
$
4,102
$
17%
1,740
(284)
1,456
3,972
1,020
(1,201)
3,791
3,717
39%
(1)
(2)
See the preceding tables for a reconciliation of Adjusted EBITDA to net income (loss) attributable to Chemours for the years ended December 31, 2019 and 2018.
Average invested capital is based on a five-quarter trailing average of invested capital, net.
59
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Chemours Company
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 our future cash flows 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 financial instruments, we are subject to credit and market risk. The fair values of the derivative financial instruments are
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 ratings.
Foreign Currency Risks
We enter into foreign currency forward contracts to minimize the volatility in our earnings related to foreign exchange gains and losses resulting from
the remeasurement of our monetary assets and liabilities that are denominated in non-functional currencies, and any gains and losses from the
foreign currency forward contracts are intended to be offset by any gains or losses from the remeasurement of the underlying monetary assets and
liabilities. These derivatives are stand-alone and, except as described below, have not been designated as a hedge. At December 31, 2019, we had
16 foreign currency forward contracts outstanding, with an aggregate gross notional U.S. dollar equivalent of $530 million, the fair value of which
amounted to less than $1 million. At December 31, 2018, we had 20 foreign currency forward contracts outstanding, with an aggregate gross
notional U.S. dollar equivalent of $503 million, the fair value of which amounted to less than $1 million. We recognized a net loss of $2 million, and
net gains of $3 million and $4 million for the years ended December 31, 2019, 2018, and 2017, respectively, within other income (expense), net
related to our non-designated foreign currency forward contracts.
We enter into certain of our qualifying foreign currency forward contracts under a cash flow hedge program to mitigate the risks associated with
fluctuations in the euro against the U.S. dollar for forecasted U.S. dollar-denominated inventory purchases in certain of our international subsidiaries
that use the euro as their functional currency. At December 31, 2019, we had 150 foreign currency forward contracts outstanding under our cash
flow hedge program with an aggregate notional U.S. dollar equivalent of $124 million, the fair value of which amounted to $1 million of net unrealized
gain. At December 31, 2018, we had 75 foreign currency forward contracts outstanding under our cash flow hedge program with an aggregate
notional U.S. dollar equivalent of $143 million, the fair value of which amounted to $3 million of net unrealized gain. We recognized pre-tax gains of
$6 million and $10 million for the years ended December 31, 2019 and 2018, respectively, on our cash flow hedge within accumulated other
comprehensive loss. For the years ended December 31, 2019 and 2018, $10 million and $4 million of gain was reclassified to the cost of goods sold
from accumulated other comprehensive loss, respectively.
We designated our euro-denominated debt as a hedge of our net investment in certain of our international subsidiaries that use the euro as their
functional currency in order to reduce the volatility in stockholders’ equity caused by changes in foreign currency exchange rates of the euro with
respect to the U.S. dollar. We recognized pre-tax gains of $20 million and $32 million, and a pre-tax loss of $86 million on our net investment hedge
within accumulated other comprehensive loss for the years ended December 31, 2019, 2018, and 2017, respectively.
Our risk management programs and the underlying exposures are closely correlated, such that the potential loss in value for the risk management
portfolio described above would be largely offset by the changes in the value of the underlying exposures. See “Note 26 – Financial Instruments” to
the Consolidated Financial Statements for further information.
Concentration of Credit Risk
Our sales are not dependent on any single customer. At December 31, 2019 and 2018, one individual customer balance represented approximately
5% and 8% of our total outstanding accounts and notes receivable balance, respectively. Any credit risk associated with our accounts and notes
receivable balance is representative of the geographic, industry, and customer diversity associated with our global businesses. 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, 2019 and
2018 was material.
We also maintain strong credit controls in evaluating and granting customer credit. As a result, we may require that customers provide some type of
financial guarantee in certain circumstances. The length of terms for customer credit varies by industry and region.
60
Commodities Risk
The Chemours Company
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 changes in the business cycle. We try to protect against such
instability through various business strategies. These include provisions in sales contracts allowing us to pass on higher raw materials costs through
timely price increases and formula price contracts to transfer or share commodity price risk. We did not have any commodity derivative financial
instruments in place as of December 31, 2019 and 2018.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this Item 8 – Financial Statements and Supplementary Data is incorporated by
reference herein as set forth in Item 15(a)(1) – Consolidated Financial Statements.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to provide reasonable assurance that the information required to be disclosed in our
reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the
rules and forms of the SEC. These controls and procedures also provide reasonable assurance that information required to be disclosed in such
reports is accumulated and communicated to management, including our CEO and CFO, to allow timely decisions regarding required disclosures.
As of December 31, 2019, our CEO and CFO, together with management, conducted an evaluation of the effectiveness of our 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 our internal control over financial reporting that occurred during the year ended December 31, 2019 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
We have completed an evaluation of our internal control over financial reporting and have concluded that our internal control over financial reporting
was effective as of December 31, 2019 (see “Management’s Report on Internal Control over Financial Reporting” on page F-2 to the Consolidated
Financial Statements).
Item 9B. OTHER INFORMATION
None.
61
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 on Form 10-K under the caption “Information
About Our Executive Officers,” the information about our directors required by this Item 10 – Directors, Executive Officers, and Corporate
Governance is contained under the caption “Proposal 1 – Election of Directors” in the definitive proxy statement for our 2020 annual meeting of
stockholders (the “2020 Proxy Statement”), which we anticipate filing with the SEC within 120 days after the end of the fiscal year to which this report
relates, and is incorporated herein by reference.
Information regarding our audit committee, code of ethics, and compliance with Section 16(a) of the Exchange Act is contained in the 2020 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 11. EXECUTIVE COMPENSATION
The information required by this Item 11 – Executive Compensation is contained in the 2020 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 this Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters and
not otherwise set forth below is contained in the 2020 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
(Shares in thousands)
Plan Category
Equity compensation plans approved by security holders
Number of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants, and Rights
(1)
December 31, 2019
Weighted-average Exercise
Price of Outstanding Options,
Warrants, and Rights
(2)
Number of Securities
Remaining Available for Future
Issuance Under Equity
Compensation Plans
(3)
7,100
$
20.92
13,900
(1)
(2)
(3)
Includes the approximate number of outstanding stock options, restricted stock units (“RSUs”), and performance share units (“PSUs”).
Represents the weighted-average exercise price of outstanding stock options only. RSUs and PSUs do not have associated exercise prices.
Reflects the approximate shares available for issuance pursuant to The Chemours Company 2017 Equity and Incentive Plan (the “2017 Plan”), which was approved by our
stockholders on April 26, 2017 and replaces The Chemours Company Equity and Incentive Plan. The maximum number of shares of stock reserved for the grant or
settlement of awards under the 2017 Plan is 19,000,000.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item 13 – Certain Relationships and Related Transactions, and Director Independence is contained in the 2020
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 this Item 14 – Principal Accounting Fees and Services is contained in the 2020 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.
62
The Chemours Company
PART IV
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) Consolidated Financial Statements
See the “Index to the Consolidated Financial Statements” commencing on page F-1 of this Annual Report on Form 10-K.
(a)(2) Financial Statement Schedule
Schedules not listed above have been omitted because they are not required, not applicable, or the required information is otherwise included.
(a)(3) Exhibits
See the “Exhibit Index” beginning on page 64 of this Annual Report on Form 10-K.
Item 16. FORM 10-K SUMMARY
None.
63
The Chemours Company
EXHIBIT INDEX
Description
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).
Amendment No. 1, dated August 24, 2017, to the Separation Agreement, dated as of July 1, 2015, by and between E. I. du Pont de Nemours and Company and The
Chemours Company (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on
August 25, 2017).
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).
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).
Fourth Supplemental Indenture, dated as of June 6, 2018, among The Chemours Company, the Guarantors named therein, U.S. Bank National Association, as trustee,
Elavon Financial Services DAC, UK Branch, as paying agent, and Elavon Financial Services DAC, as registrar and transfer agent (incorporated by reference to Exhibit 4.2 to
the Company’s Current Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on June 6, 2018).
Exhibit
Number
2.1
2.1(1)
3.1
3.2
4.1
4.1(1)
4.1(2)
4.1(3)
4.1(4)
4.1(5)
Specimen 6.625% Notes due 2023 (included in Exhibit 4.1(1)).
4.1(6)
Specimen 7.000% Notes due 2025 (included in Exhibit 4.1(2)).
4.1(7)
Specimen 6.125% Notes due 2023 (included in Exhibit 4.1(3)).
4.2
4.2(1)
4.2(2)
Indenture (for senior debt securities), dated as of May 23, 2017, by and between The Chemours Company and U.S. Bank National Association, as trustee (incorporated by
reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on May 23, 2017).
First Supplemental Indenture, dated as of May 23, 2017, by and among The Chemours Company, the guarantors named therein and U.S. Bank National Association, as
trustee (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on May 23,
2017).
Second Supplemental Indenture, dated as of June 6, 2018, among The Chemours Company, the Guarantors named therein, U.S. Bank National Association, as trustee,
Elavon Financial Services DAC, UK Branch, as paying agent, and Elavon Financial Services DAC, as registrar and transfer agent (incorporated by reference to Exhibit 4.1 to
the Company’s Current Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on June 6, 2018).
4.2(3)
4.2(4)
Specimen 5.375% Senior Note due 2027 (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K, as filed with the U.S. Securities and
Exchange Commission on May 23, 2017).
Specimen 4.000% Senior Note Due 2026 (included in Exhibit 4.2(2)).
4.3
10.1
10.2
10.3
10.4
10.14
10.16*
10.17*
Description of common stock.
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).
Amended and Restated Credit Agreement, dated as of April 3, 2018, among The Chemours Company, the Lenders and Issuing Banks party 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 April 3, 2018).
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).
64
The Chemours Company
Description
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).
Exhibit
Number
10.18*
10.19(1)* 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).
10.19(2)* The Chemours Company Stock Accumulation and Deferred Compensation Plan for Directors (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report
on Form 10-Q, as filed with the U.S. Securities and Exchange Commission on May 4, 2018).
10.20*
10.21*
10.22*
10.23*
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 and 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 and 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 and 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(1)* 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).
10.24(2)* Form of Deferred Stock Unit Terms for Non-Employee Directors under the Company’s Equity and Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company’s
Quarterly Report on Form 10-Q, as filed with the U.S. Securities and Exchange Commission on May 4, 2018).
10.25*
10.26*
10.27*
10.28*
10.30
10.31*
10.32*
10.33*
10.34*
10.35*
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 and 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 and 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).
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).
Form of Option Award Terms under the Company’s Equity Incentive Plan for grantees located in the U.S. (incorporated by reference to Exhibit 10.31 to the Company’s
Annual Report on Form 10-K for the year ended December 31, 2016).
Form of Option Award Terms under the Company’s Equity Incentive Plan for grantees located outside the U.S. (incorporated by reference to Exhibit 10.32 to the Company’s
Annual Report on Form 10-K for the year ended December 31, 2016).
Form of Award Terms of Time-Vested Restricted Stock Units under the Company’s Equity Incentive Plan for grantees located in the U.S. (incorporated by reference to
Exhibit 10.33 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016).
Form of Award Terms of Time-Vested Restricted Stock Units under the Company’s Equity Incentive Plan for grantees located outside the U.S. (incorporated by reference to
Exhibit 10.34 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016).
Form of Award Terms of Performance Share Units under the Company’s Equity Incentive Plan (incorporated by reference to Exhibit 10.35 to the Company’s Annual Report
on Form 10-K for the year ended December 31, 2016).
10.36*
Separation Agreement and Release between Paul Kirsch and the Company effective October 31, 2019, dated October 3, 2019.
10.37*
The Chemours Company 2017 Equity and Incentive Plan (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 May 1, 2017).
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.
65
The Chemours Company
Description
Exhibit
Number
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.
104
The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, which has been formatted in Inline XBRL and included within
Exhibit 101.
* Management contract or compensatory plan or arrangement.
66
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 14, 2020
By:
/s/ Sameer Ralhan
Sameer Ralhan
Senior Vice President, Chief Financial Officer and Treasurer
(As Duly Authorized Officer and Principal Financial Officer)
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
/s/ Mark P. Vergnano
Mark P. Vergnano
/s/ Sameer Ralhan
Sameer Ralhan
/s/ Matthew S. Abbott
Matthew S. Abbott
/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/ Erin N. Kane
Erin N. Kane
/s/ Sean D. Keohane
Sean D. Keohane
Title(s)
President, Chief Executive Officer, and
Director
(Principal Executive Officer)
Senior Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer)
Vice President and Controller
(Principal Accounting Officer)
Date
February 14, 2020
February 14, 2020
February 14, 2020
Chairman of the Board
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
Director
Director
Director
Director
Director
Director
Director
67
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, 2019, 2018, and 2017
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2019, 2018, and 2017
Consolidated Balance Sheets at December 31, 2019 and 2018
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2019, 2018, and 2017
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018, and 2017
Notes to the Consolidated Financial Statements
Page
F-2
F-3
F-6
F-7
F-8
F-9
F-10
F-11
F-1
The Chemours Company
Management’s Report on Internal Control over Financial Reporting
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)
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
authorization of management and directors of the Company; and,
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, uses, or dispositions 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.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019, 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, 2019.
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, 2019, as stated in its report, which is presented on the following page.
/s/ Mark P. Vergnano
Mark P. Vergnano
President and
Chief Executive Officer
February 14, 2020
/s/ Sameer Ralhan
Sameer Ralhan
Senior Vice President,
Chief Financial Officer and Treasurer
F-2
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of The Chemours Company
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of The Chemours Company and its subsidiaries (the “Company”) as of December
31, 2019 and 2018, and the related consolidated statements of operations, of comprehensive income (loss), of stockholders’ equity and of cash flows
for each of the three years in the period ended December 31, 2019, including the related notes (collectively referred to as the “consolidated financial
statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as
of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31,
2019 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 3 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, 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 the Company’s consolidated financial statements and on
the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and
whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on
a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. 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.
Definition and Limitations of Internal Control over Financial Reporting
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.
F-3
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were
communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the
consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit
matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the
critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Accrued Liabilities Associated with the Fayetteville Works Site
As described in Note 22 to the consolidated financial statements, the Company is cooperating with a variety of ongoing inquiries and investigations
from federal, state, and local authorities, regulators, and other governmental entities with respect to the discharge of hexafluoropropylene oxide
dimer acid (“HFPO Dimer Acid,” sometimes referred to as “GenX” or “C3 Dimer Acid”) and other perfluorinated and polyfluorinated compounds
(“PFAS”) from the Company’s Fayetteville Works site in North Carolina (“Fayetteville”) into the Cape Fear River, site surface water, groundwater, and
air emissions. The Company’s accruals for these off-site and on-site remedial activities as of December 31, 2019 were $201 million. The Company’s
estimated liability for off-site replacement drinking water supplies is based on management’s assessment of the current facts and circumstances for
this matter, which is subject to various assumptions that include the number of affected surrounding properties, response rates to the Company’s
offer, the type of water treatment systems selected, the cost of the selected water treatment systems, and any related operation, maintenance, and
monitoring (“OM&M”) requirements, and other charges contemplated by the Consent Order with the North Carolina Department of Environmental
Quality (“Consent Order”). The Company’s estimated liability for the on-site remediation activities that are probable and estimable is based on the
Corrective Action Plan (“CAP”) and management’s assessment of the current facts and circumstances, which are subject to various assumptions
including the transport pathways (being pathways by which PFAS reaches the Cape Fear River) which will require remedial actions, the types of site
surface water and on-site remedies and treatment systems selected and implemented, the estimated cost of such potential remedies and treatment
systems, and any related OM&M requirements, and other charges contemplated by the Consent Order and CAP.
The principal considerations for our determination that performing procedures relating to liabilities associated with Fayetteville is a critical audit
matter are there was significant judgment by management to estimate the ultimate costs expected to be incurred under environmental regulations,
the Consent Order, and the CAP which in turn led to significant auditor judgment, subjectivity and effort in performing procedures to assess
management’s judgments, including assumptions related to the number of affected surrounding properties, the type of water treatment systems
selected, the cost of the selected water treatment systems, transport pathways which will require remedial actions, the types of site surface water
and on-site remedies and treatment systems selected and implemented, and the estimated cost of such potential remedies and treatment systems
and any related OM&M requirements. Additionally, the audit effort involved the use of professionals with specialized skill and knowledge to assist in
performing these procedures and evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the
consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s determination and
valuation of the liabilities related to Fayetteville, as well as the related financial statement disclosures. These procedures also included, among
others, (i) testing the reasonableness of management’s assumptions used to estimate the ultimate costs, including the number of affected
surrounding properties, the type and cost of water treatment systems selected, transport pathways which will require remedial actions, the types of
site surface water and on-site remedies and treatment systems selected and implemented, and the estimated cost of such potential remedies and
treatment systems and any related OM&M requirements, (ii) obtaining and evaluating responses to letters of audit inquiry from legal counsel, and (iii)
evaluating the sufficiency of the Company’s disclosures related to the matter. Professionals with specialized skill and knowledge were used to assist
us in evaluating the estimated costs resulting from the Consent Order and CAP.
Goodwill Impairment Assessment - Mining Solutions and Fluoropolymers Reporting Units
As described in Notes 3 and 15 to the consolidated financial statements, the Company’s consolidated goodwill balance was $153 million as of
December 31, 2019, of which the goodwill associated with the Mining Solutions and Fluoropolymers reporting units was $51 million and $56 million,
respectively. Management tests its goodwill for impairment at least annually on October 1; however, these tests are performed more frequently when
events or changes in circumstances indicate that the asset may be impaired. As previously disclosed by management, in addition to the annual
impairment test performed on October 1, management determined trigger events occurred during 2019 that required certain reporting units’ goodwill
to be tested for impairment prior to the annual test. An impairment exists when the carrying value of a reporting unit exceeds its fair value. When
performing a quantitative impairment assessment, management weights the results of an income-based valuation technique, the discounted cash
flows method, and a market-based valuation technique, the guideline public companies method, to determine the reporting units’ fair values. Such
techniques require significant judgment and assumptions by management relating to short and long-term revenue growth rates, gross margins,
discount rates, market multiples, and prospective financial information surrounding future reporting unit cash flows.
F-4
The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments related to the Mining
Solutions and Fluoropolymers reporting units is a critical audit matter are there was significant judgment by management when developing the fair
value measurements of the reporting units. This in turn led to a high degree of auditor effort in performing procedures to evaluate the significant
assumptions used in management’s interim and annual impairment assessments, including short and long-term revenue growth rates, gross
margins, discount rates, and market multiples. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to
assist in performing these procedures and evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the
consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment
assessments, including controls over the valuation of the Company’s reporting units. These procedures also included, among others, testing
management’s process for developing the fair value estimates; evaluating the appropriateness of the discounted cash flow models and the guideline
public companies models; testing the completeness, accuracy, and relevance of underlying data used in the models; and evaluating the significant
assumptions used by management, including short and long-term revenue growth rates, gross margins, discount rates, and market multiples.
Evaluating management’s assumptions related to short and long-term revenue growth rates, gross margins, discount rates, and market multiples
involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the
respective reporting unit, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with
evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the
Company’s discounted cash flow models, the guideline public companies models, and certain significant assumptions.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 14, 2020
We have served as the Company’s auditor since 2014.
F-5
The Chemours Company
Consolidated Statements of Operations
(Dollars in millions, except per share amounts)
Net sales
Cost of goods sold
Gross profit
Selling, general, and administrative expense
Research and development expense
Restructuring, asset-related, and other charges
Total other operating expenses
Equity in earnings of affiliates
Interest expense, net
Loss on extinguishment of debt
Other (expense) income, net
(Loss) income before income taxes
(Benefit from) provision for income taxes
Net (loss) income
Less: Net income attributable to non-controlling interests
Net (loss) income attributable to Chemours
Per share data
Basic (loss) earnings per share of common stock
Diluted (loss) earnings per share of common stock
Year Ended December 31,
2018
2017
2019
$
$
$
5,526
4,463
1,063
548
80
87
715
29
(208)
—
(293)
(124)
(72)
(52)
—
(52)
(0.32)
(0.32)
$
$
$
6,638
4,667
1,971
657
82
49
788
43
(195)
(38)
162
1,155
159
996
1
995
5.62
5.45
6,183
4,438
1,745
626
81
57
764
33
(214)
(1)
113
912
165
747
1
746
4.04
3.91
$
$
$
See accompanying notes to the consolidated financial statements.
F-6
The Chemours Company
Consolidated Statements of Comprehensive Income (Loss)
(Dollars in millions)
Pre-tax
$
(124)
$
2019
Tax
After-tax
(52)
$
72
Net (loss) income
Other comprehensive income
(loss):
Year Ended December 31,
2018
Tax
Pre-tax
$
1,155
$
(159)
After-tax
996
$
Pre-tax
2017
Tax
$
912
$
(165)
After-tax
747
$
Hedging activities:
Unrealized gain
(loss) on net
investment hedge
Unrealized gain on
cash flow hedge
Reclassifications to
net income - cash
flow hedge
Hedging activities, net
Cumulative translation
adjustment
Defined benefit plans:
Additions to
accumulated other
comprehensive loss:
Net (loss) gain
Prior service
benefit
Effect of foreign
exchange rates
Reclassifications to
net income:
Amortization of
prior service
gain
Amortization of
actuarial loss
Settlement loss
Defined benefit plans,
net
Other comprehensive
income (loss)
Cumulative effect of adopting
ASU No. 2018-02
Comprehensive income
Less: Comprehensive income
attributable to non-controlling
interests
Comprehensive income
attributable to Chemours
20
6
(10)
16
2
(144)
5
7
(2)
18
383
267
285
—
161
—
(5)
(1)
1
(5)
—
31
(1)
—
—
(4)
(91)
(65)
(70)
—
2
—
15
5
(9)
11
2
32
10
(4)
38
(75)
(113)
(115)
—
8
(2)
16
—
(93)
(130)
—
1,025
4
7
(2)
14
292
202
215
—
163
—
(8)
(1)
1
(8)
—
29
—
—
—
(4)
—
25
17
(9)
(151)
24
9
(3)
30
(75)
(86)
—
8
(2)
12
—
(68)
(113)
(9)
874
(86)
—
—
(86)
200
24
—
(38)
(2)
24
—
8
122
—
1,034
24
—
—
24
—
(5)
—
—
—
(6)
—
(11)
13
—
(152)
—
(62)
—
—
(62)
200
19
—
(38)
(2)
18
—
(3)
135
—
882
1
1
—
1
1
$
161
$
2
$
163
$
1,024
$
(151)
$
873
$
1,033
$
(152)
$
881
See accompanying notes to the consolidated financial statements.
F-7
The Chemours Company
Consolidated Balance Sheets
(Dollars in millions, except per share amounts)
December 31,
2019
2018
Assets
Current assets:
Cash and cash equivalents
Accounts and notes receivable, net
Inventories
Prepaid expenses and other
Total current assets
Property, plant, and equipment
Less: Accumulated depreciation
Property, plant, and equipment, net
Operating lease right-of-use assets
Goodwill and other intangible assets, net
Investments in affiliates
Other assets
Total assets
Liabilities
Current liabilities:
Accounts payable
Short-term and current maturities of long-term debt
Other accrued liabilities
Total current liabilities
Long-term debt, net
Operating lease liabilities
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;
188,893,478 shares issued and 163,574,243 shares outstanding at December 31, 2019;
187,204,567 shares issued and 170,780,474 shares outstanding at December 31, 2018)
Treasury stock, at cost (25,319,235 shares at December 31, 2019;
16,424,093 shares at December 31, 2018)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total Chemours stockholders’ equity
Non-controlling interests
Total equity
Total liabilities and equity
$
$
$
$
943
674
1,079
81
2,777
9,413
(5,854)
3,559
294
174
162
292
7,258
923
134
484
1,541
4,026
245
118
633
6,563
2
(1,072)
859
1,249
(349)
689
6
695
7,258
$
$
$
$
1,201
861
1,147
84
3,293
8,992
(5,701)
3,291
—
181
160
437
7,362
1,137
13
559
1,709
3,959
—
217
457
6,342
2
(750)
860
1,466
(564)
1,014
6
1,020
7,362
See accompanying notes to the consolidated financial statements.
F-8
The Chemours Company
Consolidated Statements of Stockholders’ Equity
(Dollars in millions, except per share amounts)
Common Stock
Treasury Stock
Shares
Amount
Shares
Amount
Additional
Paid-in
Capital
(Accumulated
Deficit)
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss) Income
Non-controlling
Interests
Total Equity
Balance at
January 1, 2017
Common stock issued
- compensation plans
Exercise of stock
options, net
Purchases of treasury
stock, at cost
Stock-based
compensation
expense
Cancellation of
unissued stock
awards withheld to
cover taxes
Net income
Dividends ($0.29 per
share)
Other comprehensive
income
Balance at
December 31, 2017
Common stock issued
- compensation plans
Exercise of stock
options, net
Purchases of treasury
stock, at cost
Shares issued under
employee stock
purchase plan
Stock-based
compensation
expense
Cancellation of
unissued stock
awards withheld to
cover taxes
Cumulative effect of
adopting ASU No.
2018-02
Net income
Dividends ($0.67 per
share)
Other comprehensive
loss
Balance at
December 31, 2018
Common stock issued
- compensation plans
Exercise of stock
options, net
Purchases of treasury
stock, at cost
Stock-based
compensation
expense
Cancellation of
unissued stock
awards withheld to
cover taxes
Net loss
Dividends ($1.00 per
share)
Other comprehensive
income
Balance at
December 31, 2019
182,600,533
$
569,263
2,173,238
—
—
—
—
—
—
185,343,034
783,346
1,078,187
—
—
—
—
—
—
—
—
187,204,567
1,098,542
590,369
—
—
—
—
—
—
188,893,478
$
2
—
—
—
—
—
—
—
—
2
—
—
—
—
—
—
—
—
—
—
2
—
—
—
—
—
—
—
—
2
—
$
—
$
789
$
(114 )
$
(577 )
$
4
$
—
—
2,386,406
—
—
—
—
—
2,386,406
—
—
14,050,098
(12,411 )
—
—
—
—
—
—
16,424,093
—
—
8,895,142
—
—
—
—
—
—
—
(116 )
—
—
—
—
—
(116 )
—
—
(634 )
—
—
—
—
—
—
—
(750 )
—
—
(322 )
—
—
—
—
—
—
31
—
29
(12 )
—
—
—
837
—
16
—
—
24
(17 )
—
—
—
—
860
1
9
—
19
(30 )
—
—
—
—
—
—
—
—
746
(53 )
—
579
—
—
—
—
—
—
9
995
(117 )
—
1,466
(1 )
—
—
—
—
(52 )
(164 )
—
—
—
—
—
—
—
—
135
(442 )
—
—
—
—
—
—
(9 )
—
—
(113 )
(564 )
—
—
—
—
—
—
—
215
—
—
—
—
—
1
—
—
5
—
—
—
—
—
—
—
1
—
—
6
—
—
—
—
—
—
—
—
25,319,235
$
(1,072 )
$
859
$
1,249
$
(349 )
$
6
$
104
—
31
(116 )
29
(12 )
747
(53 )
135
865
—
16
(634 )
—
24
(17 )
—
996
(117 )
(113 )
1,020
—
9
(322 )
19
(30 )
(52 )
(164 )
215
695
See accompanying notes to the consolidated financial statements.
F-9
The Chemours Company
Consolidated Statements of Cash Flows
(Dollars in millions)
Cash flows from operating activities
Net (loss) income
Adjustments to reconcile net income to cash provided by (used for) operating activities:
2019
Year Ended December 31,
2018
2017
$
(52)
$
996
$
Depreciation and amortization
Gain on sales of assets and businesses
Equity in earnings of affiliates, net
Loss on extinguishment of debt
Amortization of debt issuance costs and issue discounts
Deferred tax (benefit) provision
Asset-related charges
Stock-based compensation expense
Net periodic pension cost (income)
Defined benefit plan contributions
Other operating charges and credits, net
Decrease (increase) in operating assets:
Accounts and notes receivable, net
Inventories and other operating assets
(Decrease) increase in operating liabilities:
Accounts payable and other operating liabilities
Cash provided by operating activities
Cash flows from investing activities
Purchases of property, plant, and equipment
Acquisition of business, net
Proceeds from sales of assets and businesses, net
Proceeds from life insurance policies
Foreign exchange contract settlements, net
Cash used for investing activities
Cash flows from financing activities
Proceeds from issuance of debt, net
Proceeds from revolving loan
Repayments on revolving loan
Proceeds from accounts receivable securitization facility
Debt repayments
Payments related to extinguishment of debt
Payments of debt issuance costs
Payments on finance leases
Purchases of treasury stock, at cost
Proceeds from exercised stock options, net
Payments related to tax withholdings on vested stock awards
Payments of dividends
Cash (used for) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at January 1,
Cash and cash equivalents at December 31,
Supplemental cash flows information
Cash paid during the year for:
Interest, net of amounts capitalized
Income taxes, net of refunds
Non-cash investing and financing activities:
Changes in property, plant, and equipment included in accounts payable
Obligations incurred under build-to-suit lease arrangement
Purchases of treasury stock not settled by year-end
Non-cash financing arrangements
Deferred payments related to acquisition of business
Dividends accrued but not yet paid
311
(10)
(3)
—
9
(165)
43
19
381
(19)
(2)
191
116
(169)
650
(481)
(10)
9
1
(2)
(483)
—
150
(150)
128
(37)
—
—
(3)
(322)
9
(30)
(164)
(419)
(6)
(258)
1,201
943
204
85
85
40
—
11
15
—
$
$
$
284
(45)
18
38
11
23
4
24
(18)
(15)
(7)
47
(284)
64
1,140
(498)
(37)
46
—
2
(487)
520
—
—
—
(679)
(29)
(12)
—
(644)
16
(17)
(148)
(993)
(15)
(355)
1,556
1,201
206
75
37
47
—
—
—
—
$
$
$
$
$
$
747
273
(22)
(33)
1
13
83
3
29
(22)
(38)
12
(88)
(146)
(172)
640
(411)
—
39
—
2
(370)
495
—
—
—
(27)
(1)
(6)
—
(106)
31
(12)
(22)
352
32
654
902
1,556
208
79
(14)
8
10
—
—
31
See accompanying notes to the consolidated financial statements.
F-10
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Note 1. Background and Description of the Business
The Chemours Company (“Chemours,” or the “Company”) is a leading, global provider of performance chemicals that are key inputs in end-products
and processes in a variety of industries. The Company delivers customized solutions with a wide range of industrial and specialty chemicals products
for markets, including plastics and coatings, refrigeration and air conditioning, general industrial, electronics, mining, and oil refining. The Company’s
principal products include refrigerants, industrial fluoropolymer resins, sodium cyanide, performance chemicals and intermediates, and titanium
dioxide (“TiO2”) pigment. Chemours manages and reports its operating results through three reportable segments: Fluoroproducts, Chemical
Solutions, and Titanium Technologies. The Fluoroproducts segment is a leading, global provider of fluoroproducts, including refrigerants and
industrial fluoropolymer resins. The Chemical Solutions segment is a leading, North American provider of industrial chemicals used in gold
production, industrial, and consumer applications. The Titanium Technologies segment is a leading, global producer of TiO2 pigment, a premium
white pigment used to deliver whiteness, brightness, opacity, and protections in a variety of applications.
Chemours has manufacturing facilities, sales centers, administrative offices, and warehouses located throughout the world. Chemours’ operations
are primarily located in the U.S., Canada, Mexico, Brazil, the Netherlands, Belgium, China, Taiwan, Japan, Switzerland, Singapore, Hong Kong,
India, and France. At December 31, 2019, the Company operated 30 major production facilities globally, of which, 20 were dedicated to
Fluoroproducts, one was dedicated to Chemical Solutions, seven were dedicated to Titanium Technologies, and two supported multiple segments.
Chemours began operating as an independent company on July 1, 2015 (the “Separation Date”) after separating from E.I. DuPont de Nemours and
Company (“DuPont”) (the “Separation”). 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 at the Separation Date. On August 31, 2017, DuPont completed a merger with The Dow Chemical
Company (“Dow”). Following their merger, DuPont and Dow engaged in a series of reorganization steps and, in 2019, separated into three publicly-
traded companies named Dow Inc., DuPont de Nemours, Inc., and Corteva, Inc. (“Corteva”).
Unless the context otherwise requires, references herein to “The Chemours Company,” “Chemours,” “the Company,” “our Company,” “we,” “us,” and
“our” refer to The Chemours Company and its consolidated subsidiaries. References herein to “DuPont” refer to E. I. du Pont de Nemours and
Company, which is now a subsidiary of Corteva.
Note 2. Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles
(“GAAP”). In the opinion of management, all adjustments (consisting of normal, recurring adjustments) considered necessary for a fair presentation
of the Company’s financial position and results of operations have been included for the periods presented herein. The notes that follow are an
integral part of the Company’s consolidated financial statements.
Certain prior period amounts have been reclassified to conform to the current period presentation, the effect of which, was not material to the
Company’s consolidated financial statements.
Note 3. Summary of Significant Accounting Policies
Preparation of Financial Statements
The consolidated financial statements have been prepared in conformity with GAAP, which requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the
consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Management’s estimates are
based on historical experiences, facts, and circumstances available at the time and various other assumptions that management believes are
reasonable. Actual results could differ from those estimates.
F-11
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Principles of Consolidation
The consolidated financial statements include the accounts of Chemours and its subsidiaries, as well as 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 non-controlling 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 the operating and financial policies of the investee, are accounted 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 Company assesses the requirements related to the consolidation of any variable interest entity (“VIE”), including a qualitative assessment of
power and economics that considers which entity has the power to direct the activities that most significantly impact the VIE’s economic
performance, and has the right to receive any benefits or the obligation to absorb any losses of the VIE. No such VIE was consolidated by the
Company for the periods presented.
All intercompany accounts and transactions were eliminated in the preparation of the accompanying consolidated financial statements.
Revenue Recognition
Chemours recognizes revenue using a five-step model resulting in revenue being recognized as performance obligations within a contract have been
satisfied. The steps within that model include: (i) identifying the existence of a contract with a customer; (ii) identifying the performance obligations
within the contract; (iii) determining the contract’s transaction price; (iv) allocating the transaction price to the contract’s performance obligations; and,
(v) recognizing revenue as the contract’s performance obligations are satisfied. A contract with a customer exists when: (i) the Company enters into
an enforceable agreement that defines each party’s rights regarding the goods or services to be transferred, and the related payment terms; (ii) the
agreement has commercial substance; and, (iii) it is probable that the Company will collect the consideration to which it is entitled to in the exchange.
A performance obligation is a promise in a contract to transfer a distinct good or service, or a series of distinct goods or services to a customer. The
transaction price is the customary amount of consideration that the Company expects to be entitled to in exchange for a transfer of the promised
goods or services to a customer, excluding any amounts collected by the Company on behalf of third parties (e.g., sales and use taxes). Judgment is
required to apply the principles-based, five-step model for revenue recognition. Management is required to make certain estimates and assumptions
about the Company’s contracts with its customers, including, among others, the nature and extent of its performance obligations, its transaction price
amounts and any allocations thereof, the critical events which constitute satisfaction of its performance obligations, and when control of any
promised goods or services is transferred to its customers.
The Company’s revenue from contracts with customers is reflected in the consolidated statements of operations as net sales, the vast majority of
which represents product sales that consist of a single performance obligation. Product sales to customers are made under a purchase order (“PO”),
or in certain cases, in accordance with the terms of a master services agreement (“MSA”) or similar arrangement, which documents the rights and
obligations of each party to the contract. When a customer submits a PO for product or requests product under an MSA, a contract for a specific
quantity of distinct goods at a specified price is created, and the Company’s performance obligation under the contract is satisfied when control of
the product is transferred to the customer, which is indicated by shipment of the product and the transfer of title and the risk of loss to the customer.
Revenue is recognized on consignment sales when control transfers to the customer, generally at the point of customer usage of the product. The
transaction price for product sales is generally the amount specified in the PO or in the request under an MSA; however, as is common in Chemours’
industry, the Company offers variable consideration in the form of rebates, volume discounts, early payment discounts, pricing based on formulas or
indices, price matching, and guarantees to certain customers. Such amounts are included in the Company’s estimated transaction price using either
the expected value method or the most-likely amount, depending on the nature of the variable consideration included in the contract. The Company
regularly assesses its customers’ creditworthiness, and product sales are made based on established credit limits. Payment terms for the Company’s
invoices are typically less than 90 days.
The Company also licenses the right to access certain of its trademarks to customers under specified terms and conditions in certain arrangements,
which is recognized as a component of net sales in the consolidated statements of operations. Under such arrangements, the Company may receive
a royalty payment for a trademark license that is entered into on a stand-alone basis or incorporated into an overall product sales arrangement.
Royalty income is generally based on customer sales and recognized under the sales-based exception as the customer sale occurs. When minimum
guaranteed royalty amounts are included in the transaction price, the Company recognizes royalty income ratably over the license period for the
minimum amount. When there is no consideration specified for the use of the Company’s trademark, the entire transaction price is recognized in
connection with the transfer of control of product. Royalty income resulting from the right to use the Company’s technology is considered outside the
scope of revenue recognition under GAAP as it is not a part of the Company’s ongoing major or central activities, and is recognized as a component
of other income (expense), net in the consolidated statements of operations in accordance with agreed-upon terms at the point or points in time that
performance obligations are satisfied.
F-12
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Consistent with the fact that the vast majority of the Company’s payment terms are less than 90 days from the point at which control of the promised
goods or services is transferred, no adjustments have been made for the effects of a significant financing component. Additionally, the Company has
elected to recognize the incremental costs associated with obtaining contracts as an expense when incurred if the amortization period of the assets
that the Company would have recognized is one year or less. Amounts billed to customers for shipping and handling fees are considered a fulfillment
cost and are included in net sales, and the costs incurred by the Company for the delivery of goods are classified as a component of the cost of
goods sold in the consolidated statements of operations.
Research and Development Expense
Research and development (“R&D”) costs are expensed as incurred. R&D 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.
Provision for (Benefit from) Income Taxes
The provision for (benefit from) income taxes is determined using the asset and liability approach of accounting for income taxes. Under this
approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered
or paid. The provision for (benefit from) income taxes represents income taxes paid or payable for the current year, plus the change in deferred taxes
during the year. Deferred taxes result from differences between the financial and tax bases of Chemours’ assets and liabilities and are adjusted for
changes in tax rates and tax laws when changes are enacted. The Company’s deferred tax assets and liabilities are presented on a net basis by
jurisdictional filing group. Net deferred tax assets are presented as a component of other assets, while net deferred tax liabilities are presented as a
component of deferred income taxes on the Company’s consolidated balance sheets. 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 any interest related to unrecognized income tax
positions as a component of other income (expense), net in the consolidated statements of operations. Income tax-related penalties are included in
the provision for (benefit from) income taxes.
Earnings Per Share
Chemours presents both basic earnings per share and diluted earnings per share. Basic earnings per share excludes dilution and is computed by
dividing the total net income (loss) attributable to Chemours by the weighted-average number of shares outstanding for the period. Diluted earnings
per share reflects the dilution that could occur if the Company’s outstanding stock-based compensation awards, including any unvested restricted
shares, were vested and exercised, thereby resulting in the issuance of common stock as determined under the treasury stock method. In periods
where the Company incurs a net loss, stock-based compensation awards are excluded from the calculation of earnings per share as their inclusion
would have an anti-dilutive effect.
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.
Accounts and Notes Receivable and Allowance for Doubtful Accounts
Accounts and notes 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 and notes receivable portfolio, which is determined on the basis of historical experience, specific
allowances for known troubled accounts, and other available evidence. Accounts and notes receivable are written-off when management determines
that they are uncollectible.
Inventories
Chemours’ U.S. inventories are valued at the lower of cost or market, as inventories held at substantially all U.S. locations are valued using the last-
in, first-out (“LIFO”) method. Chemours’ non-U.S. inventories are valued at the lower of cost or net realizable value, as inventories held outside the
U.S. are valued using the average cost method. The elements of cost in inventories include raw materials, direct labor, and manufacturing overhead.
Stores and supplies are valued at the lower of cost or net realizable value. Cost is generally determined by the average cost method.
F-13
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Property, Plant, and Equipment
Property, plant, and equipment is carried at cost and is depreciated using the straight-line method. 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 consolidated balance sheets and are included in the determination of any 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 their
extension to the asset’s useful life. Capitalized repair and maintenance costs are recorded on the consolidated balance sheets as a component of
other assets.
Impairment of Long-lived Assets
Chemours evaluates the carrying value of its long-lived assets to be held and used when events or changes in circumstances indicate the carrying
value may not be recoverable. For the purposes of recognition or measurement of an impairment charge, the assessment is performed on the asset
or asset group at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.
To determine the level at which the assessment is performed, 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 the asset or asset group are separately identifiable and are less than its carrying value. In that event, a loss is
recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. The fair value methodology used is an
estimate of fair market value, which is made based on prices of similar assets or other valuation methodologies, including present value techniques.
Long-lived assets to be disposed of by means other than 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 the estimated cost to sell.
Depreciation is discontinued for any long-lived assets classified as held for sale.
Goodwill and Other Intangible Assets
The excess of the purchase price over the estimated fair value of the net assets acquired in a business combination, including any identified
intangible assets, is recorded as goodwill. Chemours tests its goodwill for impairment at least 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 an operating segment, or one level below an operating segment. A reporting unit is the level at which
discrete financial information is available and reviewed by business management on a regular basis. An impairment exists when the carrying value of
a reporting unit exceeds its fair value. The amount of impairment loss recognized in the consolidated statements of operations is equal to the excess
of a reporting unit’s carrying value over its fair value, which is limited to the total amount of goodwill allocated to the reporting unit.
Chemours has the option to first qualitatively assess whether it is more-likely-than-not that an impairment exists for a reporting unit. Such qualitative
factors include, among other things, prevailing macroeconomic conditions, industry and market conditions, changes in costs associated with raw
materials, labor, or other inputs, the Company’s overall financial performance, and certain other entity-specific events that impact Chemours’
reporting units. When performing a quantitative test, the Company weights the results of an income-based valuation technique, the discounted cash
flows method, and a market-based valuation technique, the guideline public companies method, to determine its reporting units’ fair values.
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 periodically
evaluated.
F-14
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Asset Retirement Obligations
Chemours records its asset retirement obligations at their fair value at the time the liability is incurred. Fair value is measured using the expected
future cash outflows discounted at Chemours’ credit-adjusted, risk-free interest rate, which is considered to be a Level 3 input within the fair value
hierarchy. Accretion expense is recognized as an operating expense within the cost of goods sold in the consolidated statements of operations using
the credit-adjusted, risk-free interest rate in effect when the liability was recognized. The associated asset retirement costs are capitalized as part of
the carrying amount of the long-lived asset and are depreciated over the estimated remaining useful life of the asset, generally for periods ranging
from two to 25 years.
Insurance
Chemours insures for 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 any historical claims experience, demographic factors, and other
actuarial assumptions. For certain other risks, the Company uses a combination of third-party insurance and self-insurance, reflecting its
comprehensive review of relevant risks. A receivable for an insurance recovery is generally recognized when the loss has occurred and collection is
considered probable.
Litigation
Chemours accrues for legal matters when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated.
Litigation-related liabilities and expenditures included in the consolidated financial statements include legal matters that are liabilities of DuPont and
its subsidiaries, which 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 that services are rendered.
Environmental Liabilities and Expenditures
Chemours accrues for environmental remediation matters when it is probable that a liability has been incurred and the amount of the liability can be
reasonably estimated. Where the available information is only sufficient to establish a range of probable liability, and no point within the range is
more likely than any other, the lower end of the range has been used.
Estimated liabilities are determined based on existing remediation laws and technologies and our planned remedial responses, which are derived
from in-depth environmental studies, sampling, testing, and analyses. Inherent uncertainties exist in such evaluations, primarily due to unknown
environmental conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation technologies. These
accruals are adjusted periodically as remediation efforts progress and as additional technological, regulatory, and legal information becomes
available.
Environmental liabilities and expenditures include claims for matters that are liabilities of DuPont and its subsidiaries, which 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, and are included in other accrued liabilities and other liabilities on the consolidated balance sheets.
Costs related to environmental remediation are charged to expense in the period that the associated liability is accrued and are reflected as a
component of the cost of goods sold in the consolidated statements of operations. Other environmental costs are also charged to expense in the
period incurred, unless they extend the useful life of the property, increase the property’s capacity, and/or reduce or prevent contamination from
future operations, in which case they are capitalized and amortized.
Treasury Stock
Chemours accounts for repurchases of the Company’s common stock as treasury stock using the cost method, whereby the entire cost of the
acquired common stock is recorded as treasury stock.
F-15
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Stock-based Compensation
Chemours’ stock-based compensation consists of stock options, restricted stock units (“RSUs”), and performance share units (“PSUs”) awarded to
employees and non-employee directors. Stock options and PSUs are measured at their fair value on the grant date or date of modification, as
applicable. RSUs are measured at the stock price on the grant date or date of modification, as applicable. The Company recognizes compensation
expense on a straight-line basis over the requisite service and/or performance period, as applicable. Forfeitures of awards are accounted as a
reduction in stock-based compensation expense in the period such awards are forfeited.
Derivatives
In the ordinary course of business, Chemours enters into contractual arrangements (i.e., derivatives) to reduce its exposure to foreign currency risks.
The Company has established a derivative program to be utilized for financial risk management, which currently includes the following risk
management strategies: (i) foreign currency forward contracts, which are used to minimize the volatility in the Company’s earnings related to foreign
exchange gains and losses resulting from the remeasurement of its monetary assets and liabilities that are denominated in non-functional
currencies; (ii) foreign currency forward contracts, which are used to mitigate the risks associated with fluctuations in the euro against the U.S. dollar
for forecasted U.S. dollar-denominated inventory purchases in certain of the Company’s international subsidiaries that use the euro as their
functional currency; and, (iii) euro-denominated debt, which is used to reduce the volatility in stockholders’ equity resulting from changes in foreign
currency exchange rates of the euro with respect to the U.S. dollar for certain of the Company’s international subsidiaries that use the euro as their
functional currency. The Company’s derivative program reflects varying levels of exposure coverage and time horizons based on an assessment of
risk. The derivative program operates within Chemours’ financial risk management policies and guidelines, and the Company does not enter into
derivative financial instruments for trading or speculative purposes.
The Company’s foreign currency forward contracts that are used as a net monetary assets and liabilities hedge are not part of a cash flow hedge
program or a fair value hedge program, and have not been designated as a hedge. For these instruments, any gains and losses resulting from the
revaluation of derivative assets and liabilities are recognized in other income (expense), net in the consolidated statements of operations during the
period in which they occurred, and any such gains or losses are intended to be offset by any gains or losses on the underlying asset or liability. For
the Company’s foreign currency forward contracts that have been designated under a cash flow hedge program, any gains and losses resulting from
the revaluation of derivative assets and liabilities are recognized as a component of accumulated other comprehensive loss on the consolidated
balance sheets during the period in which they occurred, and are reclassified to the cost of goods sold in the consolidated statements of operations
during the period in which the underlying transactions affect earnings, or when it becomes probable that the forecasted transactions will not occur.
Changes due to remeasurement of the Company’s euro-denominated debt instruments, which are designated as a net investment hedge, are
included in accumulated other comprehensive loss on the consolidated balance sheets. Chemours’ uses the spot method to evaluate the
effectiveness of its net investment hedge.
Derivative assets and liabilities are reported on a gross basis on the consolidated balance sheets.
Foreign Currency Translation
Chemours identifies its separate and distinct foreign entities and groups them into two categories: (i) extensions of the parent (U.S. dollar functional
currency); and, (ii) 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 clearly indicate that the functional currency has changed.
During the periods covered by the consolidated financial statements, part of 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, with the exception of inventories, prepaid expenses, property, plant, and equipment, goodwill, and other intangible
assets. These aforementioned assets are remeasured at historical exchange rates. Foreign currency-denominated revenue and expense amounts
are measured at exchange rates in effect during the period, with the exception of expenses related to any balance sheet amounts remeasured at
historical exchange rates. Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities
are included in other income (expense), net in the consolidated statements of operations in the period in which they occurred.
F-16
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
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 on the consolidated balance sheets. Assets and liabilities denominated in currencies 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 other income (expense), net in the
consolidated statements of operations in the period in which they occurred. Revenues and expenses are translated into U.S. dollars at average
exchange rates in effect during the period.
Defined Benefit Plans
Due to local regulations outside of the U.S., Chemours has defined benefit plans covering certain of its employees. The benefits of these plans,
which primarily relate to pension, are accrued over the employees’ service periods. The Company uses actuarial methods and assumptions in the
valuation of its defined benefit obligations and the determination of any net periodic pension income or expense. Any 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. Rather,
they are systematically recognized over subsequent periods.
Fair Value Measurement
Fair value is defined as the exit price, the price that would be received to sell an asset or transfer a liability in an orderly transaction between market
participants at the measurement date. Under the accounting for fair value measurements and disclosures, a fair value hierarchy was established to
prioritize the valuation inputs used to measure fair value. The hierarchy gives highest priority to unadjusted, quoted prices in active markets for
identical assets and liabilities (i.e., Level 1 measurements) and lowest priority to unobservable inputs (i.e., 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 applies the following valuation hierarchy in measuring the fair values of its assets and liabilities:
Level 1 – Quoted prices in active markets for identical assets and liabilities;
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,
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 and Not Yet Adopted
Measurement of Credit Losses on Financial Instruments
In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments (“ASU No. 2016-13”). The amendments in this update affect loans, debt securities, trade
receivables, and any other financial assets that have the contractual right to receive cash, which, for the Company, primarily consists of accounts
and notes receivable, net. ASU No. 2016-13 requires an entity to recognize expected credit losses rather than incurred losses for financial assets.
For public entities, the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal
years, and early adoption is permitted. The Company does not expect the impact of adopting this guidance to be material to its financial position,
results of operations, and cash flows.
F-17
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Recently Adopted Accounting Guidance
Leases
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU No. 2016-02”), which supersedes the leases requirements in Topic
840. The core principle of ASU No. 2016-02 is that a lessee should recognize on the balance sheet the lease assets and lease liabilities that arise
from all lease arrangements with terms greater than 12 months. Recognition of these lease assets and lease liabilities represents a change from
previous GAAP, which did not require lease assets and lease liabilities to be recognized for operating leases.
The Company adopted ASU No. 2016-02 on January 1, 2019 using the modified retrospective transition method, which did not require the Company
to adjust comparative periods. Operating leases are included in operating lease right-of-use assets, other accrued liabilities, and operating lease
liabilities on the consolidated balance sheets. Finance leases are included in property, plant, and equipment, net, short-term and current maturities of
long-term debt, and long-term debt, net, on the consolidated balance sheets. The Company’s lease assets and lease liabilities are recognized on the
lease commencement date in an amount that represents the present value of future lease payments. The Company’s incremental borrowing rate,
which is based on information available at the adoption date for existing leases and the commencement date for leases commencing after the
adoption date, is used to determine the present value of lease payments.
The most significant impact of the Company’s adoption of ASU No. 2016-02 was the recognition of $333 of operating lease right-of-use assets and
$349 of operating lease liabilities on its consolidated balance sheets at January 1, 2019. Operating lease right-of-use assets were reduced by $16
due to a tenant improvement allowance on a lease of office space. The Company’s adoption of ASU No. 2016-02 did not have any impact to the
Company’s consolidated statements of operations, or its consolidated statements of cash flows. Further, there was no impact on the Company’s
covenant compliance under its current debt agreements as a result of the adoption of ASU No. 2016-02.
The Company elected the package of practical expedients included in this guidance, which allowed it to not reassess: (i) whether any expired or
existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and, (iii) the initial direct costs for existing leases. The
Company combines lease components with non-lease components for all classes of assets, except for certain manufacturing facilities. The Company
also elected the practical expedient to not assess whether existing or expired land easements contain a lease.
The Company does not recognize short-term leases on its consolidated balance sheets, and will recognize those lease payments in the consolidated
statements of operations on a straight-line basis over the lease term. Certain leases contain variable payments which are based on usage or
operating costs, such as utilities and maintenance. These payments are not included in the measurement of the right-of-use asset or lease liability
due to uncertainty of the payment amount and are recorded as lease expense in the period incurred. Leases with the options to extend their term or
terminate early are reflected in the lease term when it is reasonably certain that the Company will exercise such options.
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
In August 2018, the FASB issued ASU No. 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s
Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU No. 2018-15”), which aligns the
requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for
capitalizing implementation costs incurred to develop or obtain internal-use software. Pursuant to the amendments, the Company, when acting as a
customer to a cloud computing arrangement that is a service contract, is required to follow the guidance in Subtopic 350-40 to determine the
implementation costs to capitalize as an asset related to the service contract and the costs to expense. Upon adoption, the Company had the option
to elect whether it applies the amendments under ASU No. 2018-15 retrospectively, or prospectively to all implementation costs incurred after the
date of adoption. The Company adopted ASU No. 2018-15 on January 1, 2019 using the prospective adoption method, the effect of which, was not
material to its financial position, results of operations, or cash flows for the year ended December 31, 2019.
Changes to Disclosure Requirements for Defined Benefit Plans
In August 2018, the FASB issued ASU No. 2018-14, Compensation –Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20):
Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU No. 2018-14”). This update removes disclosures
that are no longer considered cost beneficial, clarifies the specific requirements of certain disclosures, and adds new disclosure requirements that
are considered relevant for employers that sponsor defined benefit pension or other postretirement plans. The Company adopted ASU No. 2018-14
on December 31, 2019 using retrospective application, the effect of which, was not material to its financial statement disclosures.
F-18
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Note 4. Acquisitions and Divestitures
Divestiture of Methylamines and Methylamides
In December 2019, the Company entered into an asset purchase agreement with Belle Chemical Company (“Belle”), a subsidiary of Cornerstone
Chemical Company, whereby Belle agreed to acquire the Methylamines and Methylamides business of Chemours’ Chemical Solutions segment for a
negligible purchase price, subject to customary working capital and other adjustments, but not to exceed a loss on sale of $2. The Company
completed the sale and, in December 2019, subsequent to working capital adjustments, received cash proceeds of $2. Prior to the completion of the
sale, in the second half of 2019, the Company recorded accelerated depreciation of $34, which was recorded as a component of restructuring, asset-
related, and other charges in the consolidated statements of operations. Upon completion of the sale, the Company also recorded an additional pre-
tax loss on sale of $2, net of a benefit from working capital adjustments, in other expense, net in the consolidated statements of operations.
Acquisition of Southern Ionics Minerals, LLC.
In August 2019, the Company, through its wholly-owned subsidiary, The Chemours Company FC, LLC, entered into a Membership Interest
Purchase Agreement to acquire all of the outstanding stock of Southern Ionics Minerals, LLC (“SIM”), for an estimated total consideration of
approximately $25, which included customary working capital and other adjustments made within a specified time period. SIM is a privately-held
minerals exploration, mining, and manufacturing company headquartered in Jacksonville, Florida. SIM mines and processes titanium and zirconium
mineral sands, and this acquisition expands Chemours’ flexibility and scalability to internally source ore in the Company’s Titanium Technologies
segment. The aggregate purchase price of $25 included an upfront payment of $10, an additional installment payment of $10, and contingent
considerations with an estimated fair value of $5. The Company accounted for the acquisition of SIM as a business combination, and as such, all
assets acquired and liabilities assumed were recorded at their estimated fair values.
The purchase consideration has been primarily assigned to the property, plant, and equipment of the acquired business, and there is no goodwill
associated with the transaction. These amounts were subject to further adjustment during the applicable measurement period as additional
information was obtained, including the finalization of a third-party appraisal. The Company completed its assessment during the fourth quarter of
2019, and no subsequent adjustments were made to these amounts.
The Company’s consolidated financial statements include SIM’s results of operations from August 1, 2019, the date of acquisition, through
December 31, 2019. Net sales and net income (loss) attributable to Chemours contributed by SIM during this period were not material to the
Company’s or its Titanium Technologies segment’s results of operations. Acquisition-related expenses amounted to less than $1 for the year ended
December 31, 2019 and are included as a component of selling, general, and administrative expense in the consolidated statements of operations.
Acquisition of ICOR International, Inc.
In April 2018, the Company, through its wholly-owned subsidiary, The Chemours Company FC, LLC, entered into a Stock Purchase Agreement
(“SPA”) to acquire all of the outstanding stock of ICOR International, Inc. (“ICOR”), a closely-held private company that produces, sells, and
distributes replacement refrigerant gases for use in commercial, industrial, and automotive refrigerant applications. Pursuant to the terms of the SPA,
the Company paid $37 in total consideration at closing in the all-cash acquisition, which included customary working capital and other adjustments
made within a specified time period. The acquisition of ICOR complements the Company’s existing portfolio of product offerings within the
Fluoroproducts segment, as well as provides the Company with access to ICOR’s established customer base and assembled workforce.
The Company accounted for the acquisition of ICOR as a business combination, and as such, all assets acquired and liabilities assumed were
recorded at their estimated fair values. The excess of the consideration transferred over the fair value of the identifiable net assets acquired was
recorded as goodwill within the Fluoroproducts segment, which represents the expected future benefits arising from the assembled workforce and
other synergies to be realized from the acquisition of ICOR. The Company elected to treat the acquisition of ICOR as an asset acquisition under the
Internal Revenue Code, and as such, expects that all of the related goodwill will be deductible for federal income tax purposes.
F-19
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
The following table sets forth the Company’s fair value estimates of the assets acquired and liabilities assumed in the acquisition of ICOR, which
were finalized during the fourth quarter of 2018.
Fair Value At
Acquisition
Date
Measurement
Period
Adjustments
Adjusted
Fair Value
Weighted-
average
Useful Life
(in Years)
Assets acquired:
Accounts receivable - trade
Inventories
Property, plant, and equipment
Identifiable intangible asset:
Customer relationships (1)
Total assets acquired
Liabilities assumed:
Accounts payable
Other accrued liabilities
Total liabilities assumed
Total identifiable net assets acquired
Goodwill (1)
Net assets acquired
$
$
4 $
8
1
20
33
1
1
2
31
6
37 $
— $
—
—
2
2
—
—
—
2
(2)
— $
4
8
1
22
35
1
1
2
33
4
37
5
(1)
During the third quarter of 2018, the Company recorded a measurement period adjustment to its customer relationships based on an ongoing analysis associated with the
preparation of a third-party appraisal.
The fair value of ICOR’s customer relationships was determined using the excess earnings method, which is a discounted cash flows approach. This
method takes into account significant unobservable inputs and is a Level 3 fair value measurement within the fair value hierarchy. The use of this
valuation methodology requires management to make various assumptions, including, but not limited to, assumptions about future profitability, cash
flows, and discount rates applicable to the acquired business and, where applicable, market participants. These assumptions are based on
management’s best estimates and include considerations related to management’s knowledge and experience, historical trends, general economic
conditions, and other situational factors.
The Company’s consolidated financial statements include ICOR’s results of operations from April 2, 2018, the date of acquisition, through December
31, 2018, as well as the year ended December 31, 2019. Net sales and net income (loss) attributable to Chemours contributed by ICOR during these
periods were not material to the Company’s or its Fluoroproducts segment’s results of operations. Acquisition-related expenses amounted to less
than $1 at December 31, 2018, and are included as a component of selling, general, and administrative expense in the consolidated statements of
operations.
Sale of Land in Linden, New Jersey
In March 2016, the Company entered into an agreement to sell a 210-acre plot of land that formerly housed a DuPont manufacturing site located in
Linden, New Jersey. The land was assigned to Chemours in connection with its separation from DuPont, and the Company completed the sale in
March 2018 for a gain of $42 and net cash proceeds of $39. As part of the sales agreement, the buyer agreed to assume certain costs associated
with ongoing environmental remediation activities at the site amounting to $3, which have been reflected as a component of prepaid expenses and
other on the consolidated balance sheets. Chemours remains responsible for certain other ongoing environmental remediation activities at the site,
which were previously accrued as a component of other liabilities on the consolidated balance sheets.
F-20
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Note 5. Net Sales
Disaggregation of Net Sales
The following table sets forth a disaggregation of the Company’s net sales by geographic region and segment and product group for the years ended
December 31, 2019 and 2018.
Year Ended December 31,
2019
2018
Net sales by geographic region (1)
North America:
Fluoroproducts
Chemical Solutions
Titanium Technologies
Total North America
Asia Pacific:
Fluoroproducts
Chemical Solutions
Titanium Technologies
Total Asia Pacific
Europe, the Middle East, and Africa:
Fluoroproducts
Chemical Solutions
Titanium Technologies
Total Europe, the Middle East, and Africa
Latin America (2):
Fluoroproducts
Chemical Solutions
Titanium Technologies
Total Latin America
Total net sales
Net sales by segment and product group
Fluoroproducts:
Fluorochemicals
Fluoropolymers
Chemical Solutions:
Mining solutions
Performance chemicals and intermediates
Titanium Technologies:
Titanium dioxide and other minerals
Total net sales
$
$
$
$
$
$
$
1,104
313
727
2,144
673
61
809
1,543
666
23
474
1,163
205
136
335
676
5,526
1,318
1,330
268
265
2,345
5,526
$
1,143
341
894
2,378
675
81
964
1,720
825
18
842
1,685
219
162
474
855
6,638
1,497
1,365
289
313
3,174
6,638
(1)
(2)
Net sales are attributable to countries based on customer location.
Latin America includes Mexico.
Substantially all of the Company’s net sales are derived from goods and services transferred at a point in time.
F-21
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Contract Balances
The Company’s assets and liabilities from contracts with customers constitute accounts receivable - trade, deferred revenue, and customer rebates.
An amount for accounts receivable - trade is recorded when the right to consideration under a contract becomes unconditional. An amount for
deferred revenue is recorded when consideration is received prior to the conclusion that a contract exists, or when a customer transfers
consideration prior to the Company satisfying its performance obligations under a contract. Customer rebates represent an expected refund liability
to a customer based on a contract. In contracts with customers where a rebate is offered, it is generally applied retroactively based on the
achievement of a certain sales threshold. As revenue is recognized, the Company estimates whether or not the sales threshold will be achieved to
determine the amount of variable consideration to include in the transaction price.
The following table sets forth the Company’s contract balances from contracts with customers at December 31, 2019 and 2018.
Accounts receivable - trade, net (1)
Customer rebates
Year Ended December 31,
2019
2018
$
$
602
72
790
79
(1)
Accounts receivable - trade, net includes trade notes receivable of less than $1 and $2 at December 31, 2019 and 2018, respectively, and is net of allowances for doubtful
accounts of $5 at December 31, 2019 and 2018. Such allowances are equal to the estimated uncollectible amounts.
The Company’s deferred revenue balances at December 31, 2019 and 2018 were not significant. Additionally, changes in the Company’s deferred
revenue balances resulting from additions for advance payments and deductions for amounts recognized in net sales during the years ended
December 31, 2019 and 2018, were not significant. For the years ended December 31, 2019 and 2018, the amount of revenue recognized from
performance obligations satisfied in prior periods (e.g., due to changes in transaction price) was not significant.
There were no other contract asset balances or capitalized costs associated with obtaining or fulfilling customer contracts at December 31, 2019 and
2018.
Remaining Performance Obligations
Certain of the Company’s MSA or other arrangements contain take-or-pay clauses, whereby customers are required to purchase a fixed minimum
quantity of product during a specified period, or pay the Company for such orders, even if not requested by the customer. The Company considers
these take-or-pay clauses to be an enforceable contract, and as such, the legally-enforceable minimum amounts under such an arrangement are
considered to be outstanding performance obligations on contracts with an original expected duration greater than one year. At December 31, 2019
and 2018, Chemours had $83 and $119 of remaining performance obligations, respectively. The Company expects to recognize approximately 69%
of its remaining performance obligations as revenue in 2020, an approximate additional 16% in 2021, and the balance thereafter. The Company
applies the practical expedient and does not include remaining performance obligations that have original expected durations of one year or less, or
amounts for variable consideration allocated to wholly-unsatisfied performance obligations or wholly-unsatisfied distinct goods that form part of a
single performance obligation, if any. Amounts for contract renewals that are not yet exercised by December 31, 2019 and 2018 are also excluded.
Note 6. Research and Development Expense
The following table sets forth the Company’s R&D expense by segment for the years ended December 31, 2019, 2018, and 2017.
Fluoroproducts
Chemical Solutions
Titanium Technologies
Corporate and Other
Total research and development expense
2019
Year Ended December 31,
2018
2017
48
2
29
1
80
$
$
50
2
28
2
82
$
$
48
3
29
1
81
$
$
F-22
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Note 7. Restructuring, Asset-related, and Other Charges
The following table sets forth the components of the Company’s restructuring, asset-related, and other charges by category for the years ended
December 31, 2019, 2018, and 2017.
Restructuring and other charges:
Employee separation charges
Decommissioning and other charges
Total restructuring and other charges
Asset-related charges (1)
Total restructuring, asset-related, and other charges
2019
Year Ended December 31,
2018
2017
$
$
21
23
44
43
87
$
$
14
31
45
4
49
$
$
23
33
56
1
57
(1)
Asset-related charges for the year ended December 31, 2019 included $34 for accelerated depreciation in connection with the Company’s exit of the Methylamines and
Methylamides business at its Belle, West Virginia manufacturing plant, and $9 for accelerated depreciation in connection with its closure of the titanium tetrachloride
production line at its New Johnsonville, Tennessee manufacturing plant. Asset-related charges for the year ended December 31, 2018 included $4 for a pre-tax goodwill
impairment charge in the Company’s Chemical Solutions segment.
The following table sets forth the impacts of the Company’s restructuring programs to segment earnings for the years ended December 31, 2019,
2018, and 2017.
2019
Year Ended December 31,
2018
2017
Restructuring and other charges:
Plant and product line closures:
Fluoroproducts
Chemical Solutions
Titanium Technologies
Corporate and Other
Total plant and product line closures
2017 Restructuring Program:
Fluoroproducts
Chemical Solutions
Titanium Technologies
Corporate and Other
Total 2017 Restructuring Program
2018 Restructuring Program:
Corporate and Other
Total 2018 Restructuring Program
2019 Restructuring Program:
Fluoroproducts
Chemical Solutions
Titanium Technologies
Corporate and Other
Total 2019 Restructuring Program
Total restructuring and other charges
Asset-related charges:
Chemical Solutions
Titanium Technologies
Corporate and Other
Total asset-related charges
Total restructuring, asset-related, and other charges
—
2
—
18
20
2
—
1
—
3
(1)
(1)
7
1
5
9
22
44
34
9
—
43
87
$
$
—
4
—
9
13
9
2
1
15
27
5
5
—
—
—
—
—
45
4
—
—
4
49
$
$
3
17
4
—
24
—
—
—
32
32
—
—
—
—
—
—
—
56
—
—
1
1
57
$
$
F-23
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Plant and Product Line Closures
Fluoroproducts
In August 2015, in an effort to improve the profitability of the Company’s Fluoroproducts segment, management approved the closure of certain
production lines in the segment’s U.S. manufacturing plants. For the year ended December 31, 2017, the Company recorded additional
decommissioning and dismantling-related charges of $3 for certain of these production lines. At December 31, 2017, the Company had substantially
completed all actions related to the restructuring activities for certain of its production lines, which amounted to $17 in the aggregate, excluding
asset-related charges.
Chemical Solutions
In the fourth quarter of 2015, the Company announced its completion of the strategic review of its Reactive Metals Solutions (“RMS”) business and
the decision to stop production at its Niagara Falls, New York manufacturing plant. The Company recorded additional decommissioning and
dismantling-related charges of $2, $4, and $17 for the years ended December 31, 2019, 2018, and 2017, respectively. The Company expects to
incur approximately $5 in additional restructuring charges for similar activities through 2021. As of December 31, 2019, the Company incurred, in the
aggregate, $37 in restructuring charges related to these activities, excluding asset-related charges.
In the third quarter of 2019, in an effort to improve the profitability of the Company’s Chemical Solutions segment, the Company announced plans to
exit its Methylamines and Methylamides business at its Belle, West Virginia manufacturing plant, which culminated in the completed exit and sale of
the business in the fourth quarter of 2019. As a result, for the year ended December 31, 2019, the Company recorded accelerated depreciation of
$34. We do not expect to incur additional charges related to the exit of the Methylamines and Methylamides business. Refer to “Note 4 –
Acquisitions and Divestitures” for further details.
Titanium Technologies
In August 2015, the Company announced the closure of its Edge Moor, Delaware manufacturing plant. The Edge Moor plant produced TiO2 pigment
for use in the paper industry and certain other applications where demand had steadily declined, resulting in under-used capacity at the plant. In
addition, the Company permanently closed one under-used TiO2 pigment production line at its New Johnsonville, Tennessee plant. The Company
stopped production at its Edge Moor plant in September 2015, and immediately began decommissioning the plant. For the year ended December 31,
2017, the Company recorded additional decommissioning and dismantling-related charges of $4. The Company completed these activities in 2017,
which amounted to $60 in the aggregate, excluding asset-related charges. The Company sold the land where the plant was located for $10 in the
first quarter of 2017.
In December 2019, in an effort to improve the profitability of the Company’s Titanium Technologies segment, management approved the
discontinuation of the titanium tetrachloride production line at the Company’s New Johnsonville, Tennessee site. For the year ended December 31,
2019, the Company recorded accelerated depreciation of $9. The Company does not expect to incur material decommissioning and dismantling-
related charges related to the discontinuation of this production line.
Corporate and Other
In the first quarter of 2018, the Company began a project to demolish and remove several dormant, unused buildings at its Chambers Works site in
Deepwater, New Jersey, which were assigned to Chemours in connection with its separation from DuPont and never used in Chemours’ operations.
For the years ended December 31, 2019 and 2018, the Company incurred $18 and $9, respectively, in decommissioning and dismantling-related
charges associated with these efforts. The Company expects to incur approximately $6 in additional restructuring charges related to its Chambers
Works site through the end of 2021. As of December 31, 2019, the Company incurred, in the aggregate, $27 in restructuring charges related to these
activities.
F-24
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
2017 Restructuring Program
In 2017, the Company announced certain restructuring activities designed to further the cost savings and productivity improvements outlined under
management’s transformation plan. These activities include, among other efforts: (i) outsourcing and further centralizing certain business process
activities; (ii) consolidating existing, outsourced third-party information technology (“IT”) providers; and, (iii) implementing various upgrades to the
Company’s current IT infrastructure. In connection with these corporate function efforts, the Company recorded $3, $18, and $14 in restructuring-
related charges for years ended December 31, 2019, 2018, and 2017, respectively.
In 2017, the Company also announced a voluntary separation program (“VSP”) for certain eligible U.S. employees in an effort to better manage the
anticipated future changes to its workforce. Employees who volunteered for and were accepted under the VSP were entitled to receive certain
financial incentives above the Company’s customary involuntary termination benefits to end their employment with Chemours after providing a
mutually agreed-upon service period. Approximately 300 employees separated from the Company through the end of 2018. An accrual representing
the majority of these termination benefits, amounting to $18, was recognized in the fourth quarter of 2017. The remaining $9 of incremental, one-time
financial incentives under the VSP were recognized over the period each participating employee continued to provide service to Chemours.
The Company recorded charges of $3, $27, and $32 for the years ended December 31, 2019, 2018, and 2017, respectively, for its 2017 program.
The cumulative amount incurred, in the aggregate, for the Company’s 2017 program amounted to $62 at December 31, 2019. The Company has
substantially completed all actions related to this program.
2018 Restructuring Program
In the fourth quarter of 2018, management initiated a restructuring program of the Company’s corporate functions and recorded the related estimated
severance costs of $5. The Company has substantially completed all actions related to this program.
2019 Restructuring Program
In the third quarter of 2019, management initiated a severance program of the Company’s corporate functions and businesses. For the year ended
December 31, 2019, the Company recorded the related estimated severance costs of $22, which it believes to be substantially complete for this
program. The majority of employees separated from the Company during the fourth quarter of 2019, and the majority of the associated payments will
be made by the end of 2020.
The following table sets forth the change in the Company’s employee separation-related liabilities associated with its restructuring programs for the
years ended December 31, 2019 and 2018.
Chemical
Solutions Site
Closures
Balance at January 1, 2018
Charges to income
Payments
Balance at December 31, 2018
(Credits) charges to income
Payments
Balance at December 31, 2019
$
$
2
—
(2)
—
—
—
—
Titanium
Technologies
Site Closures
1
—
(1)
—
—
—
—
$
$
2015 Global
Restructuring
2017
Restructuring
2018
Restructuring
Program
1
—
—
1
(1)
—
—
$
$
Program
23
9
(22)
10
—
(9)
1
$
$
Program
—
5
—
5
(1)
(4)
—
$
$
2019
Restructuring
Program
—
—
—
—
22
(8)
14
$
$
Total
27
14
(25)
16
20
(21)
15
$
$
At December 31, 2019 and 2018, there were no significant outstanding liabilities related to the Company’s decommissioning and other restructuring-
related charges.
F-25
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Note 8. Other Income (Expense), Net
The following table sets forth the components of the Company’s other income (expense), net for the years ended December 31, 2019, 2018, and
2017.
2019
Year Ended December 31,
2018
2017
Leasing, contract services, and miscellaneous income (1)
Royalty income (2)
Gain on sales of assets and businesses (3)
Exchange (losses) gains, net (4)
Non-operating pension and other post-retirement employee benefit (loss)
income (5)
Total other (expense) income, net
$
$
$
51
16
10
(2)
(368)
(293)
$
$
79
10
45
1
27
162
$
30
24
22
3
34
113
(1)
(2)
(3)
(4)
(5)
Leasing, contract services, and miscellaneous income includes European Union fluorinated greenhouse gas quota authorization sales of $41, $67, and $15 for the years
ended December 31, 2019, 2018, and 2017, respectively.
Royalty income for the years ended December 31, 2019 and 2018 is primarily from technology licensing. Royalty income for the year ended December 31, 2017 is primarily
from technology and trademark licensing.
For the year ended December 31, 2019, gain on sale includes a $9 non-cash gain associated with the sale of the Company’s Repauno, New Jersey site. For the year ended
December 31, 2018, gain on sale includes a $3 gain and a $42 gain associated with the sales of the Company’s East Chicago, Indiana and Linden, New Jersey sites,
respectively. For the year ended December 31, 2017, gain on sale includes a gain of $13 associated with the sale of the Company’s land in Repauno, New Jersey that was
previously deferred and realized upon meeting certain milestones, and a $12 gain associated with the sale of the Company’s Edge Moor, Delaware plant site, net of certain
losses on other disposals.
Exchange gains (losses), net includes gains (losses) on the Company’s foreign currency forward contracts that have not been designated as a cash flow hedge.
The year ended December 31, 2019 includes a $380 settlement loss related to a significant portion of the Company’s Netherlands pension plan, specific to the vested
pension benefits of the inactive participants. See “Note 27 – Long-term Employee Benefits” for further details.
Note 9. Income Taxes
The following table sets forth the components of the Company’s provision for (benefit from) income taxes for the years ended December 31, 2019,
2018, and 2017.
Current tax expense (benefit):
U.S. federal
U.S. state and local
International
Total current tax expense
Deferred tax expense (benefit):
U.S. federal
U.S. state and local
International
Total deferred tax (benefit) expense
Total (benefit from) provision for income taxes
2019
Year Ended December 31,
2018
2017
13
(1)
79
91
(77)
(5)
(81)
(163)
(72)
$
$
23 $
4
110
137
20
3
(1)
22
159
$
(8)
1
89
82
60
6
17
83
165
$
$
F-26
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
The following table sets forth the components of the Company’s deferred tax assets and liabilities at December 31, 2019 and 2018.
Deferred tax assets:
Environmental and other liabilities
Accrued litigation
Stock-based compensation and accrued employee benefits
Other assets and other accrued liabilities
Tax attribute carryforwards
Operating lease liability
Foreign tax credit carryforwards
Total deferred tax assets
Less: Valuation allowance
Total deferred tax assets, net
Deferred tax liabilities:
Pension and other liabilities
Property, plant, and equipment
Operating lease asset
Inventories and other assets
Total deferred tax liabilities
Deferred tax liability, net
December 31,
2019
2018
99
37
29
6
96
75
18
360
(10)
350
(7)
(320)
(71)
(30)
(428)
(78)
$
$
80
28
28
8
29
—
18
191
(2)
189
(35)
(313)
—
(12)
(360)
(171)
$
$
The following table sets forth an analysis of the Company’s effective tax rates for the years ended December 31, 2019, 2018, and 2017.
Statutory U.S. federal income tax rate
State income taxes, net of federal benefit
Lower effective tax rate on international operations, net
Depletion
Exchange (gains) losses
Provision to return and other adjustments
Valuation allowance
Net impact of U.S. tax reform
Stock-based compensation
Executive compensation limitation
R&D credit
Uncertain tax positions
Other, net
Total effective tax rate
2019
(26)
(7)
(28)
(5)
(7)
(4)
8
—
(14)
9
(6)
7
1
(72)
Year Ended December 31,
2018
2017
%
$
%
$
%
21.0% $
5.6%
22.7%
4.0%
5.6%
3.2%
(6.5)%
—%
11.4%
(7.3)%
4.8%
(5.6)%
(0.8)%
58.1% $
243
7
(44)
(6)
(4)
(9)
(15)
(10)
(14)
4
(5)
2
10
159
21.0% $
0.6%
(3.8)%
(0.5)%
(0.3)%
(0.8)%
(1.3)%
(0.9)%
(1.2)%
0.3%
(0.4)%
0.2%
0.9%
13.8% $
319
7
(149)
(8)
5
6
(33)
39
(20)
6
(1)
(6)
—
165
35.0%
0.7%
(16.3)%
(0.9)%
0.6%
0.6%
(3.6)%
4.3%
(2.2)%
0.7%
(0.1)%
(0.7)%
—%
18.1%
$
$
$
The following table sets forth the Company’s income (loss) before income taxes for its U.S. and international operations for the years ended
December 31, 2019, 2018, and 2017.
U.S. operations (including exports)
International operations
Total (loss) income before income taxes
2019
Year Ended December 31,
2018
2017
(375)
251
(124)
$
$
114
1,041
1,155
$
$
(306)
1,218
912
$
$
F-27
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
U.S. Tax Reform
With respect to U.S. tax reform, while management has completed its analysis within the applicable measurement period, pursuant to Staff
Accounting Bulletin No. 118 as issued by the SEC, the Company accounts for the tax impacts of new provisions based on interpretation of existing
statutory law, including proposed regulations issued by the U.S. Treasury and the Internal Revenue Service (“IRS”). While there can be no
assurances as to the effect of any final regulations on the Company’s provision for (benefit from) income taxes, management will continue to
evaluate the impacts as any issued regulations become final and adjust our estimates, as appropriate.
At December 31, 2019, management believed that sufficient liquidity was available in the U.S. As a result, the Company is indefinitely reinvested
with respect to the historical unremitted pre-2018 Earnings and Profits (“E&P”) of its foreign subsidiaries, which was approximately $440 at
December 31, 2019. Management asserts that it is indefinitely reinvested with respect to current year earnings from certain foreign subsidiaries, and
therefore, has not recorded deferred tax liabilities with respect to those earnings. At December 31, 2019, deferred tax liabilities for foreign
subsidiaries that are not indefinitely reinvested were not material to the Company’s consolidated financial statements. The potential tax implications
of the repatriation of unremitted earnings are driven by the facts at the time of distribution; however, due to U.S. tax reform and the U.S. Transition
Tax, the incremental cost to repatriate earnings is not expected to be material if a distribution is made in the future as there are minimal foreign
withholding taxes in the applicable foreign jurisdictions.
Other Matters
For the year ended December 31, 2019, the Company recorded $5 of valuation allowance on certain foreign subsidiary earnings and $3 of valuation
allowance on certain foreign tax credits.
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 future or prior years. At
December 31, 2019, the Company’s U.S federal and state tax losses amounted to $13, which substantially expire between 2036 and 2038. The
Company also had U.S. foreign tax credit carryforwards of $18, which expire in 2026, and $24 in R&D tax credits, which expire between 2035 and
2039. Lastly, the Company had foreign net operating losses of $3, which expire between 2026 and 2029.
Each year, Chemours and/or its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and non-U.S. jurisdictions.
The following table sets forth the Company’s significant jurisdictions’ tax returns that are subject to examination by their respective taxing authorities
for the open years listed.
Jurisdiction
China
India
Mexico
Netherlands
Singapore
Switzerland
Taiwan
U.S.
Open Years
2015 through 2019
2015 through 2019
2013 through 2019
2015 through 2019
2015 through 2019
2015 through 2019
2015 through 2019
2015 through 2019
F-28
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
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.
The following table sets forth the change in the Company’s unrecognized tax benefits for the years ended December 31, 2019, 2018, and 2017.
2019
Year Ended December 31,
2018
2017
$
2 $
Balance at 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
Balance at 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
$
$
—
7
—
9 $
— $
—
2
—
2 $
9 $
2 $
—
—
—
—
6
(6)
—
—
—
—
—
—
The following table sets forth a rollforward of the Company’s deferred tax asset valuation allowance for the years ended December 31, 2019, 2018,
and 2017.
Balance at January 1,
Net charges to income tax expense
Release of valuation allowance
Balance at December 31,
2019
Year Ended December 31,
2018
2017
$
$
2
8
—
10
$
$
17
—
(15)
2
$
$
50
—
(33)
17
F-29
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Note 10. Earnings Per Share of Common Stock
The following table sets forth the reconciliations of the numerators and denominators for the Company’s basic and diluted earnings per share
calculations for the years ended December 31, 2019, 2018, and 2017.
Numerator:
Net (loss) income attributable to Chemours
$
(52)
$
995
$
746
Denominator:
Weighted-average number of common shares outstanding - basic
Dilutive effect of the Company’s employee compensation plans (1)
Weighted-average number of common shares outstanding - diluted (1)
164,816,839
—
164,816,839
176,968,554
5,603,467
182,572,021
184,844,106
6,139,885
190,983,991
2019
Year Ended December 31,
2018
2017
Basic (loss) earnings per share of common stock
Diluted (loss) earnings per share of common stock (1)
$
$
(0.32)
(0.32)
$
5.62
5.45
4.04
3.91
(1)
In periods where the Company incurs a net loss, the impact of potentially dilutive securities is excluded from the calculation of earnings per share as its inclusion would have
an anti-dilutive effect.
The following table sets forth the average number of stock options that were anti-dilutive and, therefore, were not included in the Company’s diluted
earnings per share calculations for the years ended December 31, 2019, 2018, and 2017.
Average number of stock options
Note 11. Accounts and Notes Receivable, Net
2019
Year Ended December 31,
2018
2017
2,206,609
393,016
43,072
The following table sets forth the components of the Company’s accounts and notes receivable, net at December 31, 2019 and 2018.
Accounts receivable - trade, net (1)
VAT, GST, and other taxes (2)
Other receivables (3)
Total accounts and notes receivable, net
December 31,
2019
2018
$
$
602
59
13
674
$
$
790
56
15
861
(1)
Accounts receivable - trade, net includes trade notes receivable of less than $1 and $2 at December 31, 2019 and 2018, respectively, and is net of allowances for doubtful
accounts of $5 at December 31, 2019 and 2018. Such allowances are equal to the estimated uncollectible amounts.
(2)
Value added tax (“VAT”) and goods and services tax (“GST”) for various jurisdictions.
(3) Other receivables consist of derivative instruments, advances, and other deposits.
Accounts and notes receivable are carried at amounts that approximate fair value. Bad debt expense amounted to less than $1 for the years ended
December 31, 2019 and 2018, and $1 for the year ended December 31, 2017.
F-30
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Note 12. Inventories
The following table sets forth the components of the Company’s inventories at December 31, 2019 and 2018.
Finished products
Semi-finished products
Raw materials, stores, and supplies
Inventories before LIFO adjustment
Less: Adjustment of inventories to LIFO basis
Total inventories
December 31,
2019
2018
$
$
589
189
559
1,337
(258)
1,079
$
$
701
195
476
1,372
(225)
1,147
Inventory values, before LIFO adjustment, are generally determined by the average cost method, which approximates current cost. Inventories are
valued under the LIFO method at substantially all of the Company’s U.S. locations, which comprised $674 and $622 (or 50% and 45%) of inventories
before the LIFO adjustments at December 31, 2019 and 2018, respectively. The remainder of the Company’s inventory held in international locations
and certain U.S. locations is valued under the average cost method.
Note 13. Property, Plant, and Equipment, Net
The following table sets forth the components of the Company’s property, plant, and equipment, net at December 31, 2019 and 2018.
Equipment
Buildings (1)
Construction-in-progress
Land
Mineral rights
Property, plant, and equipment
Less: Accumulated depreciation
Total property, plant, and equipment, net
December 31,
2019
2018
$
$
7,595
1,174
493
115
36
9,413
(5,854)
3,559
$
$
7,344
914
579
119
36
8,992
(5,701)
3,291
(1)
At December 31, 2019, buildings includes $95 in connection with the financed portion of the Chemours Discovery Hub, which was considered a build-to-suit lease asset of
$55 at December 31, 2018. Refer to note “Note 14 – Leases” for further details.
Property, plant, and equipment, net included gross assets under finance leases of $68 and $7 at December 31, 2019 and 2018, respectively. In the
second quarter of 2019, a subsidiary of the Company renegotiated the terms of an existing Fluoroproducts supply contract with Changshu 3F
Zhonghao New Chemical Materials Co., Ltd., a related party and equity method investee, to improve the long-term supply security and
competitiveness relative to not-in-kind competition of its low global warming potential foam offering. The renegotiated supply contract resulted in the
recognition of a finance lease asset and a corresponding finance lease liability, both of which amounted to $62.
Interest expense capitalized as part of property, plant, and equipment, net amounted to $10, $17, and $9 for the years ended December 31, 2019,
2018, and 2017, respectively.
Depreciation expense amounted to $304, $276, and $269 for the years ended December 31, 2019, 2018, and 2017, respectively.
F-31
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Note 14. Leases
The Company leases certain office space, equipment, railcars, tanks, barges, tow boats, and warehouses. Leases with an initial term of 12 months
or less are not recorded on the consolidated balance sheets, and lease expense is recognized over the term of these leases on a straight-line basis.
The Company’s leases have remaining terms of up to 17 years. Some leases of equipment contain immaterial amounts of residual value guarantees.
The following table sets forth the Company’s lease assets and lease liabilities and their balance sheet location at December 31, 2019.
Balance Sheet Location
December 31, 2019
Lease assets:
Operating lease right-of-use assets
Finance lease assets
Total lease assets
Lease liabilities:
Current:
Operating lease liabilities
Finance lease liabilities
Total current lease liabilities
Non-current:
Operating lease liabilities
Finance lease liabilities
Total non-current lease liabilities
Total lease liabilities
Operating lease right-of-use assets
Property, plant, and equipment, net (Note 13)
$
$
Other accrued liabilities (Note 19)
Short-term and current maturities of long-term debt (Note 20)
$
Operating lease liabilities
Long-term debt, net (Note 20)
The following table sets forth the components of the Company’s lease cost for the year ended December 31, 2019.
Operating lease cost
Short-term lease cost
Variable lease cost
Finance lease cost:
Amortization of lease assets
Interest on lease liabilities
Total lease cost
$
$
The following table sets forth the cash flows related to the Company’s leases for the year ended December 31, 2019.
$
Year Ended
December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Non-cash lease liabilities activity:
Leased assets obtained in exchange for new operating lease liabilities
Leased assets obtained in exchange for new finance lease liabilities
F-32
Year Ended
December 31, 2019
$
$
294
58
352
66
5
71
245
54
299
370
99
5
16
5
2
127
101
2
3
48
62
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
The following table sets forth the weighted-average term and weighted-average discount rate for the Company’s leases at December 31, 2019.
December 31, 2019
Weighted-average remaining lease term (years):
Operating leases
Finance leases
Weighted-average discount rate:
Operating leases
Finance leases
The following table sets forth the Company’s lease liabilities’ maturities for the next five years and thereafter.
2020
2021
2022
2023
2024
Thereafter
Total lease payments
Less: Imputed interest
Present value of lease liabilities
Operating Leases
82
$
66
49
35
29
118
379
68
311
$
As of December 31, 2019
Finance Leases
Total
$
$
9
8
8
8
8
35
76
17
59
$
$
8.5
9.2
5.10%
5.90%
91
74
57
43
37
153
455
85
370
Prior to the adoption of ASU No. 2016-02, the following table set forth the Company’s lease liabilities’ maturities for the subsequent five years and
thereafter.
2019
2020
2021
2022
2023
Thereafter
Total lease payments
Operating Leases
92
$
70
59
42
27
134
424
$
As of December 31, 2018
Finance Leases
Total
$
$
—
2
—
—
—
—
2
$
$
92
72
59
42
27
134
426
F-33
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
The Chemours Discovery Hub
In October 2017, Chemours executed a build-to-suit lease agreement to construct a new 312,000-square-foot research and development facility on
the Science, Technology, and Advanced Research campus of the University of Delaware (“UD”) in Newark, Delaware (“Chemours Discovery Hub”).
Chemours was deemed to be the owner for accounting purposes during construction of the facility. Construction was completed in the fourth quarter
of 2019, and, upon its completion, Chemours evaluated whether a sale occurred for purposes of sale-leaseback accounting treatment. The Company
determined that this transaction did not qualify for sale-leaseback accounting, and, as a result, the leasing arrangement is considered to be a
financing transaction. At completion of the construction, the build-to-suit lease liability was reclassified as a financing obligation within long-term debt,
net, and the build-to-suit lease asset was capitalized in property, plant and equipment, net. At December 31, 2019, a financing obligation of $95 and
property, plant, and equipment of $95 are recorded on the Company’s consolidated balance sheet.
The following table sets forth the Company’s minimum future payments due for the next five years and thereafter related to the Chemours Discovery
Hub financing obligation.
2020
2021
2022
2023
2024
Thereafter
Total payments
Note 15. Goodwill and Other Intangible Assets, Net
Goodwill
December 31, 2019
6
7
7
7
7
160
194
$
$
The following table sets forth the changes in the carrying amount of the Company’s goodwill by segment for the years ended December 31, 2019
and 2018.
Fluoroproducts:
Balance at January 1,
Acquisition of business
Balance at December 31,
Chemical Solutions:
Balance at January 1,
Goodwill impairment
Balance at December 31,
Titanium Technologies:
Balance at January 1,
Balance at December 31,
Total goodwill
December 31,
2019
2018
$
$
$
89
—
89
51
—
51
13
13
153
$
85
4
89
55
(4)
51
13
13
153
F-34
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Chemours consists of three operating segments: Fluoroproducts, Chemical Solutions, and Titanium Technologies. The Company defines its
reporting units as one level below these operating segments, with the exception of the Titanium Technologies segment, which is both an operating
segment and a reporting unit. The Company tested the goodwill balances attributable to each of its reporting units for potential impairment on
October 1, 2019 and 2018, the dates of Chemours’ annual goodwill assessment, and concluded that $4 of goodwill associated with the Performance
Chemicals and Intermediates reporting unit in the Chemical Solutions segment was impaired at October 1, 2018. No further goodwill impairments
were recorded for the years ended December 31, 2019 and 2018, as the fair values of the Company’s other reporting units that carry goodwill
exceeded each respective reporting unit’s carrying amount on October 1, 2019 and 2018.
The total accumulated impairment losses included in the Company’s goodwill balance at December 31, 2019 and 2018 amounted to $4.
Other Intangible Assets, Net
The following table sets forth the gross carrying amounts and accumulated amortization of the Company’s other intangible assets by major class at
December 31, 2019 and 2018.
Customer lists
Customer relationships
Patents
Purchased trademarks
Purchased and licensed technology
Other (1)
Total other intangible assets, net
Cost
9
22
19
5
3
10
68
$
$
$
December 31, 2019
Accumulated
Amortization
(8)
(8)
(19)
(3)
(3)
(6)
(47)
$
Net
Cost
$
$
1
14
—
2
—
4
21
$
$
9
22
19
5
3
10
68
$
December 31, 2018
Accumulated
Amortization
(8)
(3)
(19)
(3)
(3)
(4)
(40)
$
Net
1
19
—
2
—
6
28
$
$
(1)
Represents non-cash favorable supply contracts acquired in connection with the sale of the 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 $7, $6, and $4 for the years ended December 31, 2019, 2018,
and 2017, respectively. The estimated aggregate pre-tax amortization expense for 2020, 2021, 2022, 2023, and 2024 is $7, $7, $5, $1, and less than
$1, respectively. Definite-lived intangible assets 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 periodically evaluated. The Company does not have any indefinite-lived intangible assets.
F-35
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Note 16. Investments in Affiliates
The Company holds investments in companies where it, directly or indirectly, owns 20% to 50% of the voting stock, or has the ability to exercise
significant influence over the operating and financial policies of the investee.
The following table sets forth the carrying value, jurisdiction, and ownership percentages of the Company’s investments in affiliates at December 31,
2019 and 2018.
December 31, 2019
December 31, 2018
Investee
Chemours-Mitsui Fluorochemicals Company, Ltd.
The Chemours Chenguang Fluoromaterials Company Limited
Changshu 3F Zhonghao New Chemical Materials Co., Ltd.
Jurisdiction
Japan
China
China
Carrying Value
$
96
33
33
162
Ownership
50.0%
50.0%
10.0%
Carrying Value
$
$
94
36
30
160
Ownership
50.0%
50.0%
10.0%
$
The following table sets forth the changes in the Company’s investments in affiliates for the years ended December 31, 2019, 2018, and 2017.
Balance at January 1,
Equity in earnings of affiliates
Dividends
Currency translation and other
Balance at December 31,
2019
Year Ended December 31,
2018
2017
$
$
160 $
29
(28)
1
162 $
173 $
43
(58)
2
160 $
136
33
—
4
173
The Company engages in transactions with its equity method investees in the ordinary course of business. For the years ended December 31, 2019,
2018, and 2017, net sales to the Company’s equity method investees amounted to $135, $143, and $99, respectively, and purchases from the
Company’s equity method investees amounted to $249, $125, and $87, respectively.
Note 17. Other Assets
The following table sets forth the components of the Company’s other assets at December 31, 2019 and 2018.
Capitalized repair and maintenance costs
Pension assets (1)
Deferred income taxes
Miscellaneous
Total other assets
December 31,
2019
2018
148
59
40
45
292
$
$
178
174
46
39
437
$
$
(1)
Pension assets represent the funded status of certain of the Company’s long-term employee benefit plans. During the year ended December 31, 2019, pension assets
decreased primarily due to the Company’s settlement of a significant portion of the Netherlands pension plan, specific to the vested pension benefits of the inactive
participants. See “Note 27 – Long-term Employees Benefits” for further details.
F-36
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Note 18. Accounts Payable
The following table sets forth the components of the Company’s accounts payable at December 31, 2019 and 2018.
Trade payables
VAT and other payables
Total accounts payable
Note 19. Other Accrued Liabilities
December 31,
2019
2018
$
$
901
22
923
$
$
1,111
26
1,137
The following table sets forth the components of the Company’s other accrued liabilities at December 31, 2019 and 2018.
Compensation and other employee-related costs
Employee separation costs (1)
Accrued litigation (2)
Environmental remediation (2)
Income taxes
Customer rebates
Deferred revenue
Accrued interest
Operating lease liabilities (3)
Miscellaneous (4)
Total other accrued liabilities
December 31,
2019
2018
52
15
10
74
65
72
7
21
66
102
484
$
$
108
16
11
139
87
79
6
21
—
92
559
$
$
(1)
(2)
(3)
Represents the current portion of accrued employee separation costs related to the Company’s restructuring activities.
Represents the current portions of environmental remediation and accrued litigation, which are discussed further in “Note 22 – Commitments and Contingent Liabilities.” With
respect to the Company’s ongoing matters at Fayetteville, environmental remediation includes $20 and $75 at December 31, 2019 and 2018, respectively.
Represents the current portion of the Company’s operating lease liabilities, which is discussed further in “Note 3 – Summary of Significant Accounting Policies” and “Note 14
– Leases.”
(4) Miscellaneous primarily includes accrued utility expenses, property taxes, an accrued indemnification liability, the current portion of the Company’s asset retirement
obligations, and other miscellaneous expenses.
F-37
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Note 20. Debt
The following table sets forth the components of the Company’s debt at December 31, 2019 and 2018.
Senior secured term loans:
Tranche B-2 U.S. dollar term loan due May 2025
Tranche B-2 euro term loan due May 2025
(€344 at December 31, 2019 and €347 at December 31, 2018)
Senior unsecured notes:
6.625% due May 2023
7.000% due May 2025
4.000% due May 2026
(€450 at December 31, 2019 and 2018)
5.375% due May 2027
Securitization Facility
Finance lease liabilities
Financing obligation (1)
Other
Total debt
Less: Unamortized issue discounts
Less: Unamortized debt issuance costs
Less: Short-term and current maturities of long-term debt
Total long-term debt, net
December 31,
2019
2018
$
884
$
383
908
750
501
500
110
59
95
6
4,196
(8)
(28)
(134)
4,026
$
$
893
396
908
750
513
500
—
2
55
—
4,017
(10)
(35)
(13)
3,959
(1)
At December 31, 2019, financing obligation includes $95 in connection with the financed portion of the Chemours Discovery Hub, which was considered a build-to-suit lease
liability of $55 at December 31, 2018. Refer to “Note 14 – Leases” for further details.
Senior Secured Credit Facilities
On April 3, 2018, the Company amended and restated its credit agreement (“Credit Agreement”) that provides for a seven-year, senior secured term
loan facility and a five-year, $800 senior secured revolving credit facility (“Revolving Credit Facility”) (collectively, the “Senior Secured Credit
Facilities”). The Senior Secured Credit Facilities are subject to a springing maturity in the event that the senior unsecured notes due in May 2023 are
not redeemed, repaid, modified, and/or refinanced within the 91-day period prior to their maturity date.
The senior secured term loan facility under the Senior Secured Credit Facilities provides for a class of term loans, denominated in U.S. dollars, in an
aggregate principal amount of $900 (“Dollar Term Loan”) and a class of term loans, denominated in euros, in an aggregate principal amount of €350
(“Euro Term Loan”) (collectively, the “Term Loans”). The Dollar Term Loan bears a variable interest rate equal to, at the election of the Company,
adjusted LIBOR plus 1.75% or adjusted base rate plus 0.75%, subject to an adjusted LIBOR or an adjusted base rate floor of 0.00% or 1.00%,
respectively. The Euro Term Loan bears a variable interest rate equal to adjusted EURIBOR plus 2.00%, subject to an adjusted EURIBOR floor of
0.50%. The Term Loans will mature on April 3, 2025, and are subject to acceleration in certain circumstances.
F-38
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
The proceeds of any loans made under the Revolving Credit Facility can be used for working capital needs and other general corporate purposes,
including permitted acquisitions, as defined in the Credit Agreement. The Revolving Credit Facility bears a variable interest rate range based on the
Company’s total net leverage ratio, as defined in the Credit Agreement, between (i) a 0.25% and a 1.00% spread for adjusted base rate loans, and
(ii) a 1.25% and a 2.00% spread for LIBOR and EURIBOR loans. In addition, the Company is required to pay a commitment fee on the average daily
unused amount of the Revolving Credit Facility within an interest rate range based on its total net leverage ratio, between 0.10% and 0.25%. The
Revolving Credit Facility will mature on April 3, 2023, and is subject to acceleration in certain circumstances.
During the year ended December 31, 2019, the Company borrowed and subsequently repaid $150 under the Revolving Credit Facility. There were
no borrowings outstanding under the Revolving Credit Facility at December 31, 2019 and 2018. Issued and outstanding letters of credit under the
Revolving Credit Facility amounted to $103 and $104 at December 31, 2019 and 2018, respectively. At December 31, 2019, the effective interest
rates on the Dollar Term Loan and the Euro Term Loan were 3.6% and 2.5%, respectively, and commitment fees on the Revolving Credit Facility
were assessed at a rate of 0.20% per annum. In connection with the issuance of the Senior Secured Credit Facilities, the Company incurred a loss
on debt extinguishment of $3 for the year ended December 31, 2018.
Under the Credit Agreement, solely with respect to the Revolving Credit Facility, the Company is required to maintain a senior secured net leverage
ratio not to exceed 2.00 to 1.00 in each quarter, through the date of maturity. In addition, the Credit Agreement contains customary affirmative and
negative covenants that, among other things, limit or restrict the Company’s and its subsidiaries’ ability, subject to certain exceptions, to incur
additional indebtedness or liens, pay dividends, and engage in certain transactions, including mergers, acquisitions, asset sales, or investments,
outside of specified carve-outs. The Credit Agreement also contains customary representations and warranties and events of default. The Company
was in compliance with its debt covenants at December 31, 2019 and 2018.
The Company’s obligations under the Senior Secured Credit Facilities are guaranteed on a senior secured basis by all of its material domestic
subsidiaries, which are also guarantors of the Company’s outstanding notes, subject to certain exceptions. The obligations under the Senior Secured
Credit Facilities are also, subject to certain exceptions, secured by a first priority lien on substantially all of the Company’s assets and substantially all
of the assets of its wholly-owned, material domestic subsidiaries, including 100% of the stock of certain of its domestic subsidiaries and 65% of the
stock of certain of its foreign subsidiaries.
Senior Unsecured Notes
Senior Unsecured Notes due May 2023 and May 2025
On May 12, 2015, Chemours issued an aggregate principal amount of $2,503 in senior unsecured notes consisting of an aggregate principal amount
of $1,350 6.625% senior unsecured notes due May 2023, denominated in U.S. dollars (the “2023 Dollar Notes”), an aggregate principal amount of
€360 6.125% senior unsecured notes due May 2023, denominated in euros (the “2023 Euro Notes”), and an aggregate principal amount of $750
7.000% senior unsecured notes due May 2025, denominated in U.S dollars (the “2025 Notes”) (collectively, the “Original Notes”). The Original Notes
required or require, as applicable, payment of principal at maturity and payments of interest semi-annually in cash and in arrears on May 15 and
November 15 of each year. The proceeds from the Original Notes were issued to fund a cash distribution to DuPont in connection with the
Separation. As discussed in more detail below, the Company purchased or redeemed, as applicable, all of the outstanding 2023 Euro Notes and a
$250 aggregate principal amount of the 2023 Dollar Notes during the year ended December 31, 2018.
The Original Notes were or are, as applicable, fully and unconditionally guaranteed, jointly and severally, on a senior unsecured unsubordinated
basis, by each of Chemours’ existing and future direct or indirect domestic restricted subsidiaries that (i) incurs or guarantees indebtedness under
the Senior Secured Credit Facilities, or (ii) guarantees certain other indebtedness of the Company or any guarantor in an aggregate principal amount
in excess of $75. The Original Notes were or are, as applicable, unsecured and unsubordinated by Chemours and its guarantor subsidiaries. The
Original Notes ranked or rank, as applicable, equally in right of payment to all of Chemours’ existing and future unsecured unsubordinated debt and
senior in right of payment to all of its existing and future debt that is by its terms expressly subordinated in right of payment to the Original Notes. The
Original Notes were or are, as applicable, 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.
F-39
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Pursuant to the terms of the indenture governing the Original Notes, the Company was or is, as applicable, obligated to offer to purchase the Original
Notes at a price of (i) 101% of their principal amount, together with accrued and unpaid interest, if any, up to, but not including, the date of purchase,
upon the occurrence of certain change of control events, and (ii) 100% of their principal amount, together with accrued and unpaid interest, if any, up
to, but not including, the date of purchase, with the proceeds from certain asset dispositions. These restrictions and prohibitions were or are, as
applicable, subject to certain qualifications and exceptions set forth in the indenture governing the Original Notes, including without limitation,
reinvestment rights with respect to the proceeds of asset dispositions.
Chemours is permitted to currently redeem some or all of the 2023 Dollar Notes at specified redemption prices, and 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 Dollar Notes or the 2025
Notes by means other than a redemption, including tender offer or open market purchases. Pursuant to the terms of the tax matters agreement
entered into at the time of the Separation, the Company’s ability to pre-pay, pay down, redeem, retire, or otherwise acquire the 2025 Notes is limited
in the absence of obtaining certain tax opinions.
Senior Unsecured Notes Due May 2027
On May 23, 2017, Chemours issued a $500 aggregate principal amount of 5.375% senior unsecured notes due May 2027 (the “2027 Notes”). The
2027 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
Company received proceeds of $489, net of an original issue discount of $5 and underwriting fees and other related expenses of $6, which are
deferred and amortized to interest expense using the effective interest method over the term of the 2027 Notes. A portion of the net proceeds from
the 2027 Notes was used to pay the $335 accrued for the global settlement of the multi-district “PFOA MDL Settlement,” as discussed in “Note 22 –
Commitments and Contingent Liabilities.” The remaining proceeds from the 2027 Notes were available for general corporate purposes.
The 2027 Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured unsubordinated basis by each of Chemours’
existing and future direct and indirect domestic restricted subsidiaries that (i) incurs or guarantees indebtedness under the Senior Secured Credit
Facilities, or (ii) guarantees certain other indebtedness of Chemours or any guarantor in an aggregate principal amount in excess of $100. The
guarantees of the 2027 Notes will rank equally with all other senior indebtedness of the guarantors. The 2027 Notes rank equally in right of payment
to all of Chemours’ existing and future unsecured unsubordinated debt and are senior in right of payment to all of its existing and future debt that is
by its terms expressly subordinated in right of payment to the 2027 Notes. The 2027 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, and structurally subordinated
to the liabilities of any non-guarantor subsidiaries.
Pursuant to the terms of the indenture governing the 2027 Notes, Chemours may redeem the 2027 Notes, in whole or in part, at an amount equal to
100% of the aggregate principal amount plus a specified “make-whole” premium and accrued and unpaid interest, if any, to the date of purchase
prior to February 15, 2027. Chemours may also redeem some or all of the 2027 Notes by means other than a redemption, including tender offer and
open market repurchases. Chemours is obligated to offer to purchase the 2027 Notes at a price of 101% of the principal amount, together with
accrued and unpaid interest, if any, up to, but not including, the date of purchase, upon the occurrence of certain change of control events.
Senior Unsecured Notes due May 2026
On June 6, 2018, the Company issued an aggregate principal amount of €450 4.000% senior unsecured notes due May 2026, denominated in euros
(the “2026 Euro Notes”). The 2026 Euro Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured unsubordinated
basis, by each of the Company’s existing and future direct and indirect domestic restricted subsidiaries that (i) incurs or guarantees indebtedness
under the Senior Secured Credit Facilities, or (ii) guarantees certain other indebtedness of the Company or any guarantor in an aggregate principal
amount in excess of $100. The 2026 Euro Notes require payment of principal at maturity and payments of interest semi-annually in cash and in
arrears on May 15 and November 15 of each year.
F-40
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Pursuant to the terms of the indenture governing the 2026 Euro Notes, the Company is obligated to offer to purchase the 2026 Euro Notes at a price
of 101% of the principal amount, together with accrued and unpaid interest, if any, up to, but not including, the date of purchase, upon the
occurrence of certain change of control events. Prior to May 15, 2021, the Company may redeem the 2026 Euro Notes (i) in whole or in part, at an
amount equal to 100% of the aggregate principal amount plus a specified “make-whole” premium, and (ii) on one or more occasions, up to 35% of
the aggregate principal amount of the notes, with the net cash proceeds of one or more equity offerings at a price equal to 104% of the principal
amounts of such notes, plus accrued and unpaid interest, if any, up to, but excluding, the redemption date. The guarantees of the 2026 Euro Notes
will rank equally with all other senior indebtedness of the guarantors. The 2026 Euro Notes rank equally in right of payment to all of the Company’s
existing and future unsecured unsubordinated debt and are senior in right of payment to all of its existing and future debt that is, by its terms,
expressly subordinated in right of payment to the 2026 Euro Notes. The 2026 Euro 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, and are structurally
subordinated to the liabilities of any non-guarantor subsidiaries.
The Company received net proceeds of €445 from the offering of the 2026 Euro Notes, which, together with cash on hand, were used to purchase or
redeem, as the case may be, all of the outstanding 2023 Euro Notes and a $250 aggregate principal amount of the 2023 Dollar Notes pursuant to
the Tender Offers (defined below) and the redemption of the 2023 Euro Notes, as well as pay for any fees and expenses in connection therewith. In
connection with the concurrent redemption of the 2023 Euro Notes and issuance of the 2026 Euro Notes, the Company incurred a loss on
extinguishment of $35 for the year ended December 31, 2018.
2023 Notes Tender Offers and Redemption of the 2023 Euro Notes
On May 21, 2018, the Company commenced two all-cash tender offers to purchase: (i) up to $250 of the outstanding 2023 Dollar Notes, for a
purchase price of $1,052.50 per $1,000.00 of principal amount through an early tender deadline of June 4, 2018, and $1,022.50 per $1,000.00 of
principal amount thereafter, through June 18, 2018, the tender expiration date, plus any accrued and unpaid interest thereon (the “Dollar Tender
Offer”); and, (ii) any and all of the outstanding 2023 Euro Notes (collectively, the “2023 Notes”), for a purchase price of €1,048.75 per €1,000.00 of
principal amount through an early tender deadline of June 4, 2018, and €1,018.75 per €1,000.00 of principal amount thereafter, through June 18,
2018, the tender expiration date, plus any accrued and unpaid interest thereon (the “Euro Tender Offer”) (collectively, the “Tender Offers”).
The Company completed the Dollar Tender Offer on June 6, 2018 for an aggregate purchase price of $264, inclusive of an early participation
premium of $13 and accrued interest of $1. The Company completed the Euro Tender Offer on June 8, 2018 for an aggregate purchase price of
€310, inclusive of an early participation premium of €14 and accrued interest of €1. In connection with the Euro Tender Offer, the Company received
consents from the holders of a majority of the aggregate principal amount of the 2023 Euro Notes to amend certain provisions of the indenture
governing the 2023 Euro Notes, thereby allowing the Company to call and redeem the remaining 2023 Euro Notes outstanding upon two business
days’ notice to the noteholders. On June 8, 2018, the Company completed the redemption of the remaining outstanding 2023 Euro Notes that were
not purchased pursuant to the Euro Tender Offer. The Tender Offers and the redemption of the 2023 Euro Notes were funded with the proceeds
from the offering of the 2026 Euro Notes and cash on hand.
Accounts Receivable Securitization Facility
On July 12, 2019, the Company, through a wholly-owned special purpose entity (“SPE”), executed an agreement with a bank for an accounts
receivable securitization facility (“Securitization Facility”) for the purpose of enhancing the Company’s liquidity. Under the Securitization Facility,
certain of the Company’s subsidiaries will sell their accounts receivable to the SPE, which is a non-guarantor subsidiary. In turn, the SPE may
transfer undivided ownership interests in such receivables to the bank in exchange for cash. The Securitization Facility permits the SPE to borrow up
to a total of $125, with an option to increase to $200. The bank has a first priority security interest in all receivables held by the SPE, and the SPE
has not granted a security interest to anyone else. At December 31, 2019, receivables held by the SPE totaled $176.
Because the SPE maintains effective control over the accounts receivable, transfers of the ownership interests to the bank do not meet the criteria to
account for the transfers as true sales. As a result, the Company accounted for the transfers under the Securitization Facility as collateralized
borrowings. Cash received from the bank is a short-term obligation of the Company, which is fully-collateralized by all receivables held by the SPE.
The Securitization Facility is subject to interest charges against both the amount of outstanding borrowings and the amount of available but undrawn
commitments. The Securitization Facility bears a variable interest rate on outstanding borrowings and a fixed commitment fee on the average daily
undrawn amount. During the year ended December 31, 2019, the weighted average interest rate on the outstanding borrowings under the
Securitization Facility was 2.0%. Borrowings under the Securitization Facility are classified in its consolidated balance sheets as a component of its
current liabilities due to the short-term nature of the obligation. Borrowings and repayments under the Securitization Facility amounted to $128 and
$18, respectively. Net borrowings of $110 remained outstanding as of December 31, 2019.
F-41
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Other
During the third quarter of 2019, the Company entered into a financing arrangement, by which an external financing company funded certain of the
Company’s annual insurance premiums for $11. During the year ended December 31, 2019, the Company made payments of $5 to the financing
company, and the remaining $6 is to be repaid within the next twelve months.
Maturities
The Company has required quarterly principal payments related to the Senior Secured Credit Facilities equivalent to 1.00% per annum through
December 2024, with the balance due at maturity. Also, following the end of each fiscal year commencing on the year ended December 31, 2019, on
an annual basis, the Company is required to make additional principal payments depending on leverage levels, as defined in the amended and
restated credit agreement, equivalent to up to 50% of excess cash flows based on certain leverage targets with step-downs to 25% and 0% as actual
leverage decreases to below a 3.50 to 1.00 leverage target.
The following table sets forth the Company’s debt principal maturities for the next five years and thereafter.
2020
2021
2022
2023
2024
Thereafter (1)
Total principal maturities on debt
Year Ended
December 31,
122
13
13
921
13
2,954
4,036
$
$
(1)
The Senior Secured Credit Facilities are subject to a springing maturity in the event that the senior unsecured notes due in May 2023 are not redeemed, repaid, modified,
and/or refinanced within the 91-day period prior to their maturity date
Debt Fair Value
The following table sets forth the estimated fair values of the Company’s senior debt issues, which are based on quotes received from third-party
brokers, and are classified as Level 2 financial instruments in the fair value hierarchy. The carrying value of the Securitization Facility approximates
its fair value based on its short-term nature and maturity.
December 31, 2019
December 31, 2018
Carrying Value
Fair Value
Carrying Value
Fair Value
Senior secured term loans:
Tranche B-2 U.S. dollar term loan due May 2025
Tranche B-2 euro term loan due May 2025
(€344 at December 31, 2019 and €347 at December 31,
2018)
Senior unsecured notes:
6.625% due May 2023
7.000% due May 2025
4.000% due May 2026
(€450 at December 31, 2019 and 2018)
5.375% due May 2027
Securitization Facility
Total senior debt
Less: Unamortized issue discounts
Less: Unamortized debt issuance costs
Total senior debt, net
$
884 $
865 $
893 $
383
908
750
501
500
110
4,036 $
(8)
(28)
4,000
378
917
755
455
450
110
3,930
$
396
908
750
513
500
—
3,960 $
(10)
(35)
3,915
$
F-42
862
394
918
761
487
454
—
3,876
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Note 21. Other Liabilities
The following table sets forth the components of the Company’s other liabilities at December 31, 2019 and 2018.
Environmental remediation (1)
Employee-related costs (2)
Accrued litigation (1)
Asset retirement obligations
Deferred revenue
Miscellaneous (3)
Total other liabilities
December 31,
2019
2018
332
113
50
54
8
76
633
$
$
152
130
53
51
7
64
457
$
$
(1)
Represents the long-term portions of environmental remediation and accrued litigation, which are discussed further in “Note 22 – Commitments and Contingent Liabilities.”
With respect to the Company’s ongoing matters at Fayetteville, environmental remediation includes $181 at December 31, 2019. There were no amounts included in other
liabilities for such matters at December 31, 2018.
(2)
Employee-related costs primarily represent liabilities associated with the Company’s long-term employee benefit plans.
(3) Miscellaneous primarily includes an accrued indemnification liability of $41 and $46 at December 31, 2019 and 2018, respectively.
Note 22. Commitments and Contingent Liabilities
Asset Retirement Obligations
Chemours has recorded asset retirement obligations, which are inclusive of costs related to closure, reclamation, and removal for mining operations
in the production of TiO2 in the Titanium Technologies segment; cap, cover, and post-closure maintenance of landfills in all segments; and, shipment
and disposal of stored waste in all segments.
The following table sets forth the activity in the Company’s asset retirement obligations for the years ended December 31, 2019 and 2018.
Balance at January 1,
Accretion expense
Settlements and payments
Balance at December 31,
Current portion
Non-current portion
$
$
$
Year Ended December 31,
2019
2018
$
$
$
57
7
(3)
61
7
54
48
10
(1)
57
6
51
F-43
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Litigation Overview
In addition to the matters discussed below, the Company and certain of its subsidiaries, from time to time, are subject to various lawsuits, claims,
assessments, and proceedings with respect to product liability, intellectual property, personal injury, commercial, contractual, employment,
governmental, environmental, anti-trust, and other such matters that arise in the ordinary course of business. In addition, 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. It is not possible to predict the outcomes of these various lawsuits,
claims, assessments, or proceedings. Except as noted below, 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 the Company’s consolidated financial position, results of operations, or cash flows. Additional 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.
The Company accrues for litigation matters when it is probable that a liability has been incurred, and the amount of the liability can be reasonably
estimated. Legal costs such as outside counsel fees and expenses are recognized in the period in which the expense was incurred. Management
believes the Company’s litigation accruals are appropriate based on the facts and circumstances for each matter, which are discussed in further
detail below.
The following table sets forth the components of the Company’s accrued litigation at December 31, 2019 and 2018.
Asbestos
PFOA
All other matters
Total accrued litigation
December 31, 2019
December 31, 2018
$
$
34 $
20
6
60 $
37
22
5
64
The following table sets forth the current and long-term components of the Company’s accrued litigation and their balance sheet locations at
December 31, 2019 and 2018.
Accrued Litigation:
Current accrued litigation
Long-term accrued litigation
Total accrued litigation
Fayetteville Works, Fayetteville, North Carolina
Balance Sheet Location
December 31, 2019
December 31, 2018
Other accrued liabilities (Note 19)
Other liabilities (Note 21)
$
$
10
50
60
$
$
11
53
64
For information regarding the Company’s ongoing litigation and environmental remediation matters at its Fayetteville Works site in Fayetteville, North
Carolina (“Fayetteville”), refer to “Fayetteville Works, Fayetteville, North Carolina” under the “Environmental Overview” within this “Note 22 –
Commitments and Contingent Liabilities”.
F-44
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Asbestos
In the Separation, DuPont assigned its asbestos docket to Chemours. At December 31, 2019 and 2018, there were approximately 1,100 and 1,300
lawsuits 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 of the U.S. Most of the actions were
brought by contractors who worked at sites between the 1950s and the 1990s. A small number of cases involve similar allegations by DuPont
employees or household members of contractors or DuPont employees. Finally, certain lawsuits allege personal injury as a result of exposure to
DuPont products.
At December 31, 2019 and 2018, Chemours had an accrual of $34 and $37 related to these matters, respectively.
Benzene
In the Separation, DuPont assigned its benzene docket to Chemours. At December 31, 2019 and 2018 there were 16 and 19 cases pending against
DuPont alleging benzene-related illnesses, respectively. 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.
Management believes that a loss is reasonably possible as to the docket as a whole; 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.
PFOA
Chemours does not, and has never, used “PFOA” (collectively, perfluorooctanoic acids and its salts, including the ammonium salt) as a polymer
processing aid and/or sold it as a commercial product. Prior to the Separation, the performance chemicals segment of DuPont made PFOA at
Fayetteville 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.
At December 31, 2019 and 2018, Chemours maintained accruals of $20 and $22, respectively, related to PFOA matters under the Leach Settlement
as discussed below. These accruals relate 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 (“NJ DEP”). These obligations and voluntary commitments
include surveying, sampling, and testing drinking water in and around certain Company sites, and offering treatment or an alternative supply of
drinking water if tests indicate the presence of PFOA in drinking water at or greater than the state or the national health advisory. The Company will
continue to work with the EPA and other authorities regarding the extent of work that may be required with respect to these matters.
Leach Settlement
In 2004, DuPont settled a class action captioned Leach v. DuPont, filed in West Virginia state court, alleging that approximately 80,000 residents
living near the Washington Works facility had suffered, or may suffer, deleterious health effects from exposure to PFOA in drinking water. Among the
settlement terms, DuPont funded a series of health studies by an independent science panel of experts (“C8 Science Panel”) to evaluate available
scientific evidence on whether any probable link exists, as defined in the settlement agreement, between exposure to PFOA and 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. Under the
terms of the settlement, DuPont is obligated to fund up to $235 for a medical monitoring program for eligible class members and pay the
administrative costs associated with the program, including class counsel fees. The court-appointed Director of Medical Monitoring implemented the
program and testing is ongoing with associated payments to service providers disbursed from an escrow account which the Company replenishes
pursuant to the settlement agreement. As of December 31, 2019, approximately $1.7 has been disbursed from escrow related to medical monitoring.
While it is reasonably possible that the Company will incur additional costs related to the medical monitoring program, such costs cannot be
reasonably estimated due to uncertainties surrounding the level of participation by eligible class members and the scope of testing.
In addition, under the Leach 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, and $20 and $22 was accrued for these
matters at December 31, 2019 and 2018, respectively.
F-45
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
PFOA Leach Class Personal Injury
Further, under the Leach settlement, class members may pursue personal injury claims against DuPont only for those diseases for which the C8
Science Panel determined a probable link exists. Approximately 3,500 lawsuits were subsequently filed in various federal and state courts in Ohio
and West Virginia and consolidated in multi-district litigation (“MDL”) in Ohio federal court. These were resolved in March 2017 when DuPont entered
into an agreement settling all MDL cases and claims, including all filed and unfiled personal injury cases and claims that were part of the plaintiffs’
counsel’s claims inventory, as well as cases tried to a jury verdict (“MDL Settlement”) for $670.7 in cash, with half paid by Chemours, and half paid
by DuPont.
Concurrently with the MDL Settlement, DuPont and Chemours agreed to a limited sharing of potential future PFOA costs (indemnifiable losses, as
defined in the separation agreement between DuPont and Chemours) for a period of five years. During that five-year period, Chemours will annually
pay future PFOA costs up to $25 and, if such amount is exceeded, DuPont will pay any excess amount up to the next $25 (which payment will not be
subject to indemnification by Chemours), with Chemours annually bearing any further excess costs under the terms of the separation agreement.
After the five-year period, this limited sharing agreement will expire, and Chemours’ indemnification obligations under the separation agreement will
continue unchanged. Chemours has also agreed that it will not contest its indemnification obligations to DuPont under the separation agreement for
PFOA costs on the basis of 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 costs. Chemours has,
however, retained other defenses, including as to whether any particular PFOA claim is within the scope of the indemnification provisions of the
separation agreement.
While all MDL lawsuits were dismissed or resolved through the MDL Settlement, the MDL Settlement did not resolve PFOA personal injury claims of
plaintiffs who did not have cases or claims in the MDL or personal injury claims based on diseases first diagnosed after February 11, 2017. Since the
resolution of the MDL, approximately 61 personal injury cases have been filed and are pending in West Virginia or Ohio courts alleging status as a
Leach class member. These cases are consolidated before the MDL court. A two-plaintiff trial commenced in January 2020, and a six-plaintiff trial is
scheduled for June 2020.
State of Ohio
In February 2018, the State of Ohio initiated litigation against DuPont regarding historical PFOA emissions from the Washington Works site.
Chemours is an additional named defendant. Ohio alleges damage to natural resources and fraudulent transfer in the spin-off that created Chemours
and seeks damages including remediation and other costs and punitive damages.
PFAS
DuPont and Chemours have received governmental and regulatory inquiries and have been named in other litigations, including class actions,
brought by individuals, municipalities, businesses and water districts alleging exposure to and/or contamination from perfluorinated and
polyfluorinated compounds (“PFAS”), including PFOA. Many actions include an allegation of fraudulent transfer in the spin-off that created
Chemours. Chemours has declined DuPont’s requests for indemnity for fraudulent transfer claims.
In January 2020, Chemours received a letter informing it that the U.S. Department of Justice, Consumer Protection Branch, and the United States
Attorney’s Office for the Eastern District of Pennsylvania are considering whether to open a criminal investigation under the Federal Food, Drug, and
Cosmetic Act and asking that it retain its documents regarding PFAS and food contact applications. Based upon the letter, we are presently unable
to predict the duration, scope, or result of any potential governmental, criminal, or civil proceeding that may result, the imposition of fines and
penalties, and/or other remedies. We are also unable to develop a reasonable estimate of a possible loss or range of losses, if any.
F-46
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Aqueous Film Forming Foam Matters
Chemours does not, and has never, manufactured aqueous film forming foam (“AFFF”). DuPont and Chemours have been named in 154 matters,
involving AFFF, which is used to extinguish hydrocarbon-based (i.e., Class B) fires and subject to U.S. military specifications. Most matters have
been transferred to or filed directly into a multidistrict litigation (“AFFF MDL”) in South Carolina federal court or identified by a party for transfer. The
matters pending in the AFFF MDL allege damages as a result of contamination, in most cases due to migration from military installations or airports,
or personal injury from exposure to AFFF. Plaintiffs seek to recover damages for investigating, monitoring, remediating, treating, and otherwise
responding to the contamination. Others have claims for personal injury, property diminution and punitive damages.
There are 8 AFFF lawsuits currently pending outside the AFFF MDL that have not been designated by a party for inclusion in the MDL. These
matters are:
Valero Refining (“Valero”) has six pending state court lawsuits filed commencing in June 2019 regarding its Tennessee, Texas, Oklahoma,
California, and Louisiana facilities. These lawsuits allege that several defendants that designed, manufactured, marketed, and/or sold AFFF or PFAS
incorporated into AFFF have caused Valero to incur damages and costs including remediation, AFFF disposal, and replacement. Valero also alleges
fraudulent transfer.
In August 2019, a putative class action was filed in Alaska state court seeking class status for property owners whose groundwater has been
contaminated by AFFF use at Fairbanks International Airport, a nearby fire training facility, and other state operations. Damages sought include cost
of remediation, monitoring, medical monitoring, diminution of property value, cost of replacement water, and punitive damages. Plaintiffs also allege
fraudulent transfer.
In September 2019, a lawsuit alleging personal injury resulting from exposure to AFFF in Long Island drinking water was filed by four individuals in
New York state court. Plaintiffs also allege violation of New York Uniform Fraudulent Conveyance Act and seek compensatory and punitive
damages, and medical monitoring.
State Natural Resource Damages Matters
In addition to the State of New Jersey actions (as detailed below) and the State of Ohio action (as detailed above), the states of Vermont, New
Hampshire, New York, and Michigan have filed lawsuits against defendants, including DuPont and Chemours, relating to the alleged contamination
of state natural resources with PFAS compounds either from AFFF and/or other unidentified sources. These lawsuits seek damages including costs
to investigate, clean up, restore, treat, monitor, or otherwise respond to contamination to natural resources. The lawsuits include counts for
fraudulent transfer.
Other PFAS Matters
DuPont has also been named in approximately 51 lawsuits pending in New York courts, which are not part of the Leach class, brought by individual
plaintiffs alleging negligence and other claims in the release of PFAS, including PFOA, into drinking water, and seeking medical monitoring,
compensatory, and punitive damages against current and former owners and suppliers of a manufacturing facility in Hoosick Falls, New York. Two
other lawsuits in New York have been filed by a business seeking to recover its losses and by nearby property owners and residents in a putative
class action seeking medical monitoring, compensatory and punitive damages, and injunctive relief.
In May 2017, the Water Works and Sewer Board of the Town of Centre, Alabama filed suit against numerous carpet manufacturers located in Dalton,
Georgia and suppliers and former suppliers, including DuPont, in Alabama state court. The complaint alleges negligence, nuisance, and trespass in
the release of PFAS, including PFOA, into a river leading to the town’s water source, and seeks compensatory and punitive damages.
In February 2018, the New Jersey-American Water Company, Inc. (“NJAW”) filed suit against DuPont and Chemours in New Jersey federal court
alleging that discharges in violation of the New Jersey Spill Compensation and Control Act (“Spill Act”), were made into groundwater utilized in the
NJAW Penns Grove water system. NJAW alleges that damages include costs associated with remediating, operating, and maintaining its system,
and attorney fees.
In October 2018, a putative class action was filed in Ohio federal court against 3M, DuPont, Chemours, and other defendants seeking class action
status for U.S. residents having a detectable level of PFAS in their blood serum. The complaint seeks declaratory and injunctive relief, including the
establishment of a “PFAS Science Panel.”
F-47
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
In December 2018, the owners of a dairy farm filed a lawsuit in Maine state court against numerous defendants including DuPont and Chemours
alleging that their dairy farm was contaminated by PFAS, including perfluorooctanesulfonic acid (“PFOS”) and PFOA present in treated municipal
sewer sludge used in agricultural spreading applications on their farm. The complaint asserts negligence, trespass, and other tort and state statutory
claims and seeks damages.
In May 2019, a putative class action was filed in Delaware state court against two electroplating companies alleging that they are responsible for
PFAS contamination, including PFOA and PFOS, in drinking water and the environment in the nearby community. The suit also names 3M, DuPont,
and Chemours, asserting they sold PFAS containing materials to the electroplating companies. The putative class of residents alleges negligence,
nuisance, trespass, and other claims and seeks medical monitoring, personal injury and property damages, and punitive damages.
Commencing in August 2019, eight Long Island water suppliers filed lawsuits in New York federal court against defendants including DuPont and
Chemours regarding alleged PFAS, PFOA, and PFOS contamination through releases from industrial and manufacturing facilities and business
locations where PFAS-contaminated water was used for irrigation and sites where consumer products were disposed. The complaints allege
products liability, negligence, nuisance, trespass, and fraudulent transfer. Plaintiffs seek declaratory and injunctive relief as well as compensatory
and punitive damages.
In November 2019, 30 residents filed a lawsuit in New Jersey state court against DuPont, Chemours, and other defendants alleging that they are
responsible for PFAS contamination including PFOA and PFOS in groundwater and drinking water. Plaintiffs have claims for medical monitoring,
property value diminution, trespass, and punitive damages.
In November 2019, the City of Rome, Georgia filed suit against numerous carpet manufacturers located in Dalton, Georgia, suppliers, DuPont, and
Chemours in Georgia state court alleging negligence, nuisance, and trespass in the release of perfluorinated compounds, including PFOA, into a
river leading to the town’s water source. City of Rome alleges damages to property and lost profits, and expenses for abatement and remediation
and punitive damages.
In December 2019, a putative class action was filed in Georgia state court on behalf of customers of the Rome, Georgia water division and the Floyd
County, Georgia water department against numerous carpet manufacturers located in Dalton, Georgia, suppliers, DuPont, and Chemours in Georgia
state court alleging negligence and nuisance and related to the release of perfluorinated compounds, including PFOA, into a river leading to their
water sources. Damages sought include compensatory damages for increased water surcharges as well as punitive damages and injunctive relief
for abatement and remediation.
New Jersey Department of Environmental Protection Directives and Litigation
In March 2019, the NJ DEP issued two Directives and filed four lawsuits against Chemours and other defendants. The Directives are: (i) a state-wide
PFAS Directive issued to DuPont, DowDuPont, DuPont Specialty Products USA (“DuPont SP USA”), Solvay S.A., 3M, and Chemours seeking a
meeting to discuss future costs for PFAS related costs incurred by the NJ DEP and establishing a funding source for such costs by the Directive
recipients, and information relating to historic and current use of certain PFAS compounds; and, (ii) a Pompton Lakes Natural Resources Damages
(“NRD”) Directive to DuPont and Chemours demanding $0.1 to cover the cost of preparation of a natural resource damage assessment plan and
access to related documents.
The lawsuits filed in New Jersey state courts by the NJ DEP are: (i) in Salem County, against DuPont, 3M, and Chemours primarily alleging clean-up
and removal costs and damages and natural resource damages under the Spill Act, the Water Pollution Control Act (“WPCA”), the Industrial Site
Recovery Act (“ISRA”), and common law regarding past and present operations at Chambers Works, a site assigned to Chemours at separation; (ii)
in Middlesex County, against DuPont, DuPont SP USA, 3M, and Chemours primarily alleging clean-up and removal costs and damages and natural
resource damages under the Spill Act, ISRA, WPCA, and common law regarding past and present operations at Parlin, a DuPont owned site; (iii) in
Gloucester County, against DuPont and Chemours primarily alleging clean-up and removal costs and damages and natural resource damages under
the Spill Act, WPCA, and common law regarding past operations at Repauno, a non-operating remediation site assigned to Chemours at separation
which has been sold; and (iv) in Passaic County, against DuPont and Chemours primarily alleging clean-up and removal costs and damages and
natural resource damages under the Spill Act, WPCA, and common law regarding past operations at Pompton Lakes, a non-operating remediation
site assigned to Chemours at separation. The alleged pollutants listed in the Salem County and Middlesex County matters above include PFAS.
Each lawsuit also alleges fraudulent transfer.
DuPont requested that Chemours defend and indemnify it in these matters. Chemours has accepted the defense while reserving rights and declining
DuPont’s demand as to matters under ISRA, fraudulent transfer, or involving other DuPont entities.
F-48
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
PFOA and PFAS Summary
Management believes that it is reasonably possible that the Company could incur losses related to PFOA and/or PFAS matters in excess of amounts
accrued, but any such losses are not estimable at this time due to various reasons, including, among others, that such matters are in their early
stages and have significant factual issues to be resolved.
U.S. Smelter and Lead Refinery, Inc.
There are six lawsuits, including one putative class action in which class certification was denied, pending against DuPont by area residents
concerning the U.S. Smelter and Lead Refinery multi-party Superfund site in East Chicago, Indiana. Several of the lawsuits allege that Chemours is
now responsible for DuPont environmental liabilities. The lawsuits include allegations for personal injury damages, property diminution, and other
damages. 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. Management believes a loss is reasonably possible, but not estimable at
this time due to various reasons including, among others, that such matters are in their early stages and have significant factual issues to be
resolved.
Securities Litigation
Commencing in October 2019, two putative class action complaints were filed in Delaware federal court alleging that Chemours and certain of its
officers violated the Securities Exchange Act of 1934 by making materially false and misleading statements and omissions in public disclosures
regarding environmental liabilities assigned to Chemours in connection with its spin-off from DuPont. The complaints seek a class of purchasers of
Chemours stock between February 16, 2017 and August 1, 2019 and allege compensatory damages and fees. The Company believes the
allegations are without merit and intends to vigorously defend against them. In January 2020, the court appointed a lead plaintiff for the consolidated
litigation and set a schedule providing for the filing of a consolidated amended complaint in March 2020.
Management believes that it is not possible at this time to reasonably assess the outcome of this litigation or to estimate the loss or range of loss as
the matter is in the early stages with significant issues to be resolved. If the Company were not to prevail in the litigation, the impact could be
material to the Company’s results of operations, financial position, and cash flows.
Mining Solutions Facility Construction Stoppage
In March 2018, a civil association in Mexico filed a complaint against the government authorities involved in the permitting process of the Company’s
new Mining Solutions facility under construction in Gomez Palacio, Durango, Mexico. The claimant sought and obtained a suspension from the
district judge to stop the Company’s construction work. The suspension was subsequently lifted on appeal, and the matter is before the Supreme
Court of Mexico. A second similar complaint was filed in September 2019 and, again, a suspension of construction was granted. Chemours has filed
an appeal. In the event that the suspension of construction is ultimately upheld, the Company would incur $26 of contract termination fees with a
third-party services provider.
At December 31, 2019 the Company had $144 long-lived assets under construction at the facility, $7 of other related prepaid costs, and $51 of the
Company’s goodwill assigned to the Mining Solutions reporting unit. Management believes these amounts are recoverable as of December 31,
2019.
F-49
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Environmental Overview
Chemours, due to the terms of the Separation-related agreements with DuPont, 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, which are attributable to DuPont’s activities before it spun-off Chemours. Much of this liability results from CERCLA, the Resource
Conservation and Recovery Act, 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.
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 available information
is only sufficient to establish a range of probable liability, and no point within the range is more likely than any other, the lower end of the range has
been used. Estimated liabilities are determined based on existing remediation laws and technologies and the Company’s planned remedial
responses, which are derived from in-depth environmental studies, sampling, testing, and analyses. Inherent uncertainties exist in such evaluations,
primarily due to unknown environmental conditions, changing governmental regulations regarding liability, and emerging remediation technologies.
These accruals are adjusted periodically as remediation efforts progress and as additional technological, regulatory, and legal information becomes
available. Environmental liabilities and expenditures include claims for matters that are liabilities of DuPont and its subsidiaries, which Chemours
may be required to indemnify pursuant to the separation-related agreements. These accrued liabilities are undiscounted and do not include claims
against third parties. Costs related to environmental remediation are charged to expense in the period that the associated liability is accrued.
The following table sets forth the components of the Company’s environmental remediation liabilities at December 31, 2019 and 2018, and for the
five sites that are deemed the most significant by management, including Fayetteville as further discussed below.
Chambers Works, Deepwater, New Jersey
East Chicago, Indiana
Fayetteville Works, Fayetteville, North Carolina
Pompton Lakes, New Jersey
USS Lead, East Chicago, Indiana
All other sites
Total accrued environmental remediation
December 31, 2019
December 31, 2018
$
$
20
17
201
43
13
112
406
$
$
18
21
75
45
15
117
291
The following table sets forth the current and long-term components of the Company’s environmental remediation liabilities and their balance sheet
locations at December 31, 2019 and 2018.
Environmental Remediation:
Current environmental remediation
Long-term environmental remediation
Total environmental remediation
Balance Sheet Location
December 31, 2019
December 31, 2018
Other accrued liabilities (Note 19)
Other liabilities (Note 21)
$
$
74
332
406
$
$
139
152
291
F-50
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
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, and 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 $530 above the amount accrued at December 31, 2019.
For the years ended December 31, 2019, 2018, and 2017, Chemours incurred environmental remediation expenses of $200, $101, and $48,
respectively.
Fayetteville Works, Fayetteville, North Carolina
Fayetteville has been in operation since the 1970s and is located next to the Cape Fear River southeast of the City of Fayetteville, North Carolina.
Hexafluoropropylene oxide dimer acid (“HFPO Dimer Acid,” sometimes referred to as “GenX” or “C3 Dimer Acid”) is manufactured at Fayetteville.
The Company has operated the site since its separation from DuPont in 2015.
The Company believes that discharges from Fayetteville to the Cape Fear River, site surface water, groundwater, and air emissions have not
impacted the safety of drinking water in North Carolina. The Company is cooperating with a variety of ongoing inquiries and investigations from
federal, state, and local authorities, regulators, and other governmental entities.
Consent Order with North Carolina Department of Environmental Quality (“NC DEQ”)
In September 2017, the NC DEQ issued a 60-day notice of intent to suspend the National Pollutant Discharge Elimination System (“NPDES”) permit
for Fayetteville, and the State of North Carolina filed an action in North Carolina state court regarding site discharges, seeking a temporary
restraining order and preliminary injunction, as well as other relief, including abatement and site correction. The state court entered a partial consent
order resolving NC DEQ’s motion for a temporary restraining order.
In November 2017, NC DEQ informed the Company that it was suspending the NPDES permit for Fayetteville. The Company thereafter commenced
the capture and separate disposal of all process wastewater from Fayetteville related to the Company’s own operations.
In June 2018, the North Carolina Legislature enacted legislation (i) granting the governor the authority, in certain circumstances, to require a facility
with unauthorized PFAS discharges to cease operations, and (ii) granting the governor the authority, in certain circumstances, to direct the NC DEQ
secretary to order a PFAS discharger to establish permanent replacement water supplies for parties whose water was contaminated by the
discharge.
In July 2018, Cape Fear River Watch (“CFRW”), a non-profit organization, sued NC DEQ in North Carolina state court, seeking to require NC DEQ to
take additional actions at Fayetteville. On August 29, 2018, CFRW sued the Company in North Carolina federal court for alleged violations of the
Clean Water Act (“CWA”) and the Toxic Substances Control Act (“TSCA”), seeking declaratory and injunctive relief and penalties.
In February 2019, the North Carolina Superior Court for Bladen County approved a Consent Order (“CO”) between NC DEQ, CFRW and the
Company, resolving the State’s and CFRW’s lawsuits and other matters (including Notices of Violation (“NOVs”) issued by the State). Under the
terms of the CO, Chemours paid $13 in March 2019 to cover a civil penalty and investigative costs and agreed to certain compliance measures (with
stipulated penalties for failures to do so), including the following:
•
•
•
•
Install a thermal oxidizer to control all PFAS in process streams from certain processes at Fayetteville at an efficiency of 99.99%;
Develop, submit, and implement, subject to approval from NC DEQ and CFRW, a plan for interim actions that are economically and
technologically feasible to achieve the maximum PFAS reduction from Fayetteville to the Cape Fear River within a two-year period;
Develop and implement, subject to approval, a Corrective Action Plan that complies with North Carolina’s groundwater standards and
guidance provided by NC DEQ. At a minimum, the Corrective Action Plan must require Chemours to reduce the total loading of PFAS
originating from Fayetteville to surface water by at least 75% from baseline, as defined by the CO; and,
Provide and properly maintain permanent drinking water supplies, including via whole-building filtration units and reverse osmosis (“RO”)
units to qualifying surrounding properties with private drinking water wells.
F-51
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
The following table sets forth the components of the Company’s accrued environmental remediation liabilities related to PFAS at Fayetteville at
December 31, 2019 and 2018.
On-site remediation
Off-site groundwater remediation
Total accrued liabilities
December 31, 2019
December 31, 2018
$
$
155
46
201
$
$
10
65
75
The following table sets forth the current and long-term components of the Company’s accrued environmental remediation liabilities related to PFAS
at Fayetteville and their balance sheet locations at December 31, 2019 and 2018.
Current accrued liabilities
Long-term accrued liabilities
Total accrued liabilities
Emissions to air
Balance Sheet Location
Other accrued liabilities (Note 19)
Other liabilities (Note 21)
December 31, 2019
20
$
181
201
$
December 31, 2018
75
$
—
75
$
Fayetteville operates multiple permitted air discharge stacks, blowers, and vents as part of its manufacturing activities. A thermal oxidizer (“TO”)
became fully operational at the site on December 27, 2019, and Chemours switched to the permitted operating scenario for the TO on December 31,
2019 as set forth in the CO. The TO is designed to reduce aerial PFAS emissions from Fayetteville, and, within 90 days of installation, Chemours
and North Carolina Division of Air Quality will conduct testing to confirm whether the TO is destroying 99.99% of all PFAS air emissions routed to it,
utilizing a 2017 baseline. Environmental costs are capitalized and subsequently depreciated if the costs extend the useful life of the property,
increase the property’s capacity, and/or reduce or prevent contamination from future operations.
Off-site replacement drinking water supplies
The CO requires the Company to provide permanent replacement drinking water supplies, including via connection to public water supply, whole
building filtration units and/or RO units, to qualifying surrounding residents, businesses, schools, and public buildings with private drinking water
wells. The qualifying area residents whose drinking water wells have tested above the state provisional health goal of 140 parts per trillion (ppt) for
GenX may be eligible for public water or a whole building filtration system. Area residents whose drinking water wells have tested above 10 ppt for
GenX or other perfluorinated compounds (“Table 3 Compounds”) are eligible for three under-sink RO units. The Company provides bottled drinking
water to a residence when it becomes eligible for a replacement drinking water supply, and continues to provide delivery of bottled drinking water to
these homeowners until the eligible supply is established or installed.
The Company’s estimated liability for off-site replacement drinking water supplies is based on management’s assessment of the current facts and
circumstances for this matter, which are subject to various assumptions that include, but are not limited to, the number of affected surrounding
properties, response rates to the Company’s offer, the type of water treatment systems selected (i.e., whole building filtration or RO units), the cost of
the selected water treatment systems, and any related operation, maintenance, and monitoring (“OM&M”) requirements, assessed fines and
penalties, and other charges contemplated by the CO. For off-site drinking water supplies, OM&M is accrued for 20 years on an undiscounted basis
based on the Company’s current plans under the CO. It is estimated that $46 of disbursements related to off-site replacement drinking water
supplies will be made over approximately 20 years.
F-52
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
On-site surface water and groundwater remediation
Abatement and remediation measures already taken by Chemours, including the capture and separate disposal of its operations’ process
wastewater and other interim actions, have addressed and abated nearly all PFAS discharges from the Company’s continuing operations at
Fayetteville. However, the Company continues to have active dialogue with NC DEQ and other stakeholders regarding the potential remedies that
are both economically and technologically feasible to achieve the CO objectives related to site surface water and groundwater.
In the fourth quarter of 2019, the Company completed and submitted its Cape Fear River PFAS Loading Reduction Plan - Supplemental Information
Report and Corrective Action Plan (“CAP”) to NC DEQ. The Supplemental Information Report provides information to support the evaluation of
potential remedial options to reduce PFAS loadings to surface waters, including interim alternatives. The CAP describes potential remediation
activities to address PFAS in on-site groundwater and surface waters at the site, in accordance with the requirements of the CO and the North
Carolina groundwater standards, and builds on the previous submissions to NC DEQ. The NC DEQ has made the CAP available for public review
and comment until March 6, 2020.
The Company’s estimated liability for the remediation activities that are probable and estimable is based on the CAP and management’s assessment
of the current facts and circumstances, which are subject to various assumptions including the transport pathways (being pathways by which PFAS
reaches the Cape Fear River) which will require remedial actions, the types of site surface water and on-site remedies and treatment systems
selected and implemented, the estimated cost of such potential remedies and treatment systems, and any related OM&M requirements, and other
charges contemplated by the CO.
The CAP also addresses remediation of on-site groundwater and proposes an interim action of extraction of groundwater from existing monitoring
wells and treatment prior to discharge. Chemours also proposes to simultaneously proceed with detailed design and engineering of a permanent on-
site groundwater treatment system alternative, including collection of extensive pre-design data, while holding a final decision on which alternative
should be selected, with approval by NC DEQ, until that design and engineering work is complete (approximately two years). The actual cost of a
permanent on-site groundwater treatment system primarily depends on the determination of certain significant design details, notably the actual
barrier wall installation method (i.e., slurry wall vs. steel sheets), configuration of extraction wells, and extraction rates.
Accordingly, in the fourth quarter of 2019, based on the CO, the CAP, and management’s plans, which are based on current regulations and
technology, the Company accrued an additional $132 related to the estimated cost of on-site remediation. The incremental estimated remediation
liability, based on current potential remedial options, is primarily comprised of $42 of construction costs, which are projected to be paid through 2025,
and $88 of related OM&M requirements, which is projected to be paid over a period of approximately 20 years. The final costs of any selected
remediation will depend primarily on the final approved design and actual labor and material costs.
It is possible that issues relating to site discharges in various transport pathways, the selection of remediation alternatives to achieve PFAS loading
reductions, or the operating effectiveness of the TO could result in further litigation and/or regulatory demands with regards to Fayetteville, including
potential permit modifications. It is also possible that, as additional data is collected on the transport pathways and dialogue continues with NC DEQ
and other stakeholders, the type or extent of remediation actions required to achieve the objectives committed to in the CO may change (increase or
decrease). If such issues arise, or if the CO is amended, an additional loss is reasonably possible, but not estimable at this time.
F-53
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Other matters related to Fayetteville
The Company has responded to grand jury subpoenas, produced witnesses before a grand jury and for interviews with government investigators and
attorneys, and met with the U.S. Attorney’s Office for the Eastern District of North Carolina and the Environment and Natural Resources Division of
the U.S. Department of Justice regarding their ongoing investigation into a potential violation of the CWA. We are presently unable to predict the
duration, scope or result of any potential criminal or civil proceeding, including whether fines, penalties, and/or other remedies will be imposed. As
such, management believes that it is not possible at this time to reasonably assess the outcome of this matter or to estimate the loss or range of
losses, if any, that could result from this matter.
A Notice of Violation (NOV) was received from the EPA in February 2019 alleging certain TSCA violations at Fayetteville. Matters raised in the NOV
could have the potential to affect operations at Fayetteville. The Company responded to the EPA in March 2019 asserting that the Company has not
violated environmental laws. At this time, management does not believe that a loss is probable related to the matters in this NOV.
In 2019, civil actions have been filed against DuPont and Chemours in North Carolina federal court relating to discharges from Fayetteville. These
actions include a consolidated action brought by public water suppliers seeking damages and injunctive relief, a consolidated purported class action
seeking medical monitoring, and property damage and/or other monetary and injunctive relief on behalf of the putative classes of property owners
and residents in areas near or that draw drinking water from the Cape Fear River, and an action by private well owners seeking compensatory and
punitive damages. Ruling on the Company’s motions in April 2019, the court dismissed the medical monitoring, injunctive demand, and many other
alleged causes of actions in these lawsuits. It is possible that additional litigation may be filed against the Company and/or DuPont concerning the
discharges.
It is not possible at this point to predict the timing, course, or outcome of all governmental and regulatory inquiries and notices and litigation, and it is
reasonably possible that these matters could materially affect the Company’s financial position, results of operations, and cash flows. In addition,
local communities, organizations, and federal and state regulatory agencies have raised questions concerning HFPO Dimer Acid and other
perfluorinated and polyfluorinated compounds at certain other manufacturing sites operated by the Company. It is possible that additional
developments similar to those described above and centering on Fayetteville could arise in other locations.
Sale of East Chicago, Indiana
On June 29, 2018, the Company sold its East Chicago, Indiana site to a third party for $1. In connection with the sale, the buyer has agreed to
assume all costs associated with environmental remediation activities at the site in excess of $21, which will remain the responsibility of Chemours.
At the time of the sale, the Company had accrued the full $21, and will reimburse the buyer through a series of progress payments to be made at
defined intervals as certain tasks are completed. The Company recognized a gain of $3 on the sale, which includes the purchase price of $1, plus $2
in environmental remediation liabilities that were assumed by the buyer on the occurrence of the sale.
Sale of Potomac River, West Virginia
On September 27, 2018, the Company sold its Potomac River, West Virginia site to a third party for $4. In connection with the sale, the buyer has
agreed to assume certain future environmental remediation costs, and Chemours has retained $4 in existing environmental remediation liabilities,
which is a component of all other sites in the significant sites table above. The Company recognized a $3 gain on the sale, which was deferred and
will be recognized as the Company completes certain environmental remediation activities at the site.
Sale of Oakley, California
On September 9, 2019, the Company sold its Oakley, California site to a third party for $7, of which $4 was received at closing with receipt of the
remaining $3 of proceeds contingent upon the completion of certain future environmental remediation activities at the site. In connection with the
sale, Chemours has retained $10 in existing environmental remediation liabilities, which is a component of all other sites in the significant sites table
above. The Company recognized a $2 gain on the sale, which was deferred and will be recognized as the Company completes certain
environmental remediation activities at the site.
F-54
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Note 23. Equity
Share Repurchase Program
On November 30, 2017, the Company’s board of directors approved a share repurchase program authorizing the purchase of shares of Chemours’
issued and outstanding common stock in an aggregate amount not to exceed $500, plus any associated fees or costs in connection with the
Company’s share repurchase activity (the “2017 Share Repurchase Program”). Under the 2017 Share Repurchase Program, shares of Chemours’
common stock were purchased on the open market from time to time, subject to management’s discretion, as well as general business and market
conditions. The Company’s 2017 Share Repurchase Program became effective on November 30, 2017. On May 31, 2018, the Company completed
the aggregate $500 in authorized purchases of Chemours’ issued and outstanding common stock under the 2017 Share Repurchase Program,
which amounted to a cumulative 10,085,647 shares purchased at an average share price of $49.58 per share. All common shares purchased under
the 2017 Share Repurchase Program are held as treasury stock and are accounted for using the cost method.
On August 1, 2018, the Company’s board of directors approved a share repurchase program authorizing the purchase of shares of Chemours’
issued and outstanding common stock in an aggregate amount not to exceed $750, plus any associated fees or costs in connection with the
Company’s share repurchases activity (“2018 Share Repurchase Program”). On February 13, 2019, the Company’s board of directors increased the
authorization amount of the 2018 Share Repurchase Program from $750 to $1,000. Under the 2018 Share Repurchase Program, shares of
Chemours’ common stock can be purchased on the open market from time to time, subject to management’s discretion, as well as general business
and market conditions. The Company’s 2018 Share Repurchase Program became effective on August 1, 2018 and will continue through the earlier
of its expiration on December 31, 2020, or the completion of repurchases up to the approved amount. The program may be suspended or
discontinued at any time. All common shares purchased under the 2018 Share Repurchase Program are expected to be held as treasury stock and
accounted for using the cost method.
During 2019, the Company purchased an aggregate 8,895,142 shares of Chemours’ issued and outstanding common stock under the 2018 Share
Repurchase Program, which amounted to $322 at an average share price of $36.24 per share. During 2018, the Company purchased an aggregate
6,350,857 shares of Chemours’ issued and outstanding common stock under the 2018 Share Repurchase Program, which amounted to $250 at an
average share price of $39.31 per share. The aggregate amount of Chemours’ common stock that remained available for purchase under this
program at December 31, 2019 was $428.
Note 24. Stock-based Compensation
The Company’s stock-based compensation expense amounted to $19, $24, and $29 for the years ended December 31, 2019, 2018, and 2017,
respectively.
On April 26, 2017, Chemours’ stockholders approved The Chemours Company 2017 Equity and Incentive Plan (the “2017 Plan”), which provides for
grants to certain employees, independent contractors, or non-employee directors of the Company of different forms of awards, including stock
options, RSUs, and PSUs. The 2017 Plan replaced The Chemours Company Equity and Incentive Plan (the “Prior Plan”), which was adopted by the
Company at Separation. As a result, no further grants will be made under the Prior Plan.
A total of 19,000,000 shares of the Company’s common stock may be subject to awards granted under the 2017 Plan, less one share for every one
share that was subject to an option or stock appreciation right granted after December 31, 2016 under the Prior Plan, and one-and-a-half shares for
every one share that was subject to an award other than an option or stock appreciation right granted after December 31, 2016 under the Prior Plan.
Any shares that are subject to options or stock appreciation rights will be counted against this limit as one share for every one share granted, and
any shares that are subject to awards other than options or stock appreciation rights will be counted against this limit as one-and-a-half shares for
every one share granted. Awards that were outstanding under the Prior Plan remain outstanding under the Prior Plan in accordance with their terms.
Shares underlying awards granted under the Prior Plan after December 31, 2016 that are forfeited, cancelled, or that otherwise do not result in the
issuance of shares, will be available for issuance under the 2017 Plan. At December 31, 2019, approximately 13,900,000 shares of equity and
incentive plan reserve are available for grants under the 2017 Plan.
The Chemours Compensation Committee determines the long-term incentive mix, including stock options, RSUs, and PSUs, and may authorize new
grants annually.
F-55
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Stock Options
During 2019, 2018, and 2017, Chemours granted non-qualified stock 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 values of the Company’s stock options are based on the Black-Scholes valuation model.
The following table sets forth the weighted-average assumptions used at the respective grant dates to determine the fair values of the Company’s
stock option awards granted during the years ended December 31, 2019, 2018, and 2017.
Risk-free interest rate
Expected term (years)
Volatility
Dividend yield
Fair value per stock option
2019
Year Ended December 31,
2018
2017
2.53%
6
48.05%
2.81%
$
13.66
2.65%
6
47.56%
1.42%
$
20.47
2.14%
6
44.49%
0.35%
15.21
$
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 the average volatility of peer companies 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 life is determined using a simplified approach, calculated as the mid-point between the graded vesting period and the
contractual life of the award.
The following table sets forth Chemours’ stock option activity for the years ended December 31, 2019, 2018, and 2017.
Outstanding, December 31, 2016
Granted
Exercised
Forfeited
Expired
Outstanding, December 31, 2017
Granted
Exercised
Forfeited
Expired
Outstanding, December 31, 2018
Granted
Exercised
Forfeited
Expired
Outstanding, December 31, 2019
Exercisable, December 31, 2019
Number of
Shares
(in Thousands)
7,969
878
(2,173)
(47)
(30)
6,597
495
(1,073)
(46)
(3)
5,970
836
(590)
(110)
(50)
6,056
4,620
Weighted-
average
Exercise Price
(per Share)
$
$
$
$
$
13.72
34.84
14.36
20.55
12.29
15.72
48.41
14.69
37.77
18.80
18.45
36.48
14.56
39.06
22.12
20.92
16.23
Weighted-
average
Remaining
Contractual
Term (in Years)
5.08
Aggregate
Intrinsic Value
(in Thousands)
66,668
$
5.11
$
226,524
4.80
$
72,108
4.71
3.79
$
$
19,087
18,630
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 at the end of the year 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 year-end. The amount changes based on the fair
market value of the Company’s stock. The total intrinsic value of all options exercised for the years ended December 31, 2019, 2018, and 2017
amounted to $2, $37, and $49, respectively.
F-56
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
For the years ended December 31, 2019, 2018, and 2017, the Company recorded $9, $8, and $7 in stock-based compensation expense specific to
its non-qualified stock options, respectively. At December 31, 2019, there was $8 of unrecognized stock-based compensation expense related to
stock options, which is expected to be recognized over a weighted-average period of 1.83 years.
Restricted Stock Units
Chemours grants RSUs to key management employees that generally vest over a three-year period and, upon vesting, convert one-for-one to
Chemours’ common stock. The fair value of all stock-settled RSUs is based on the market price of the underlying common stock as of the grant date.
RSUs vest contingent upon a time-based vesting condition and do not have explicit performance conditions.
The following table sets forth non-vested RSUs at December 31, 2019, 2018, and 2017.
Non-vested, December 31, 2016
Granted
Vested
Forfeited
Non-vested, December 31, 2017
Granted
Vested
Forfeited
Non-vested, December 31, 2018
Granted
Vested
Forfeited
Non-vested, December 31, 2019
Number of Shares
(in Thousands)
Weighted-average
Grant Date
Fair Value
(per Share)
2,316
214
(1,316)
(49)
1,165
135
(1,034)
(19)
247
439
(110)
(30)
546
$
$
$
$
11.23
36.68
11.46
14.27
15.34
48.35
14.86
30.94
34.22
26.89
24.98
33.90
29.95
The Company recorded stock-based compensation expense specific to its RSUs of $7 for the years ended December 31, 2019 and 2018, and $14
for the year ended December 31, 2017. At December 31, 2019, there was $10 of unrecognized stock-based compensation expense related to RSUs,
which is expected to be recognized over a weighted-average period of 0.88 years.
F-57
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Performance Share Units
Chemours grants PSUs to key senior management employees which, upon vesting, convert one-for-one to Chemours’ common stock if specified
performance goals, including certain market-based conditions, are met over the three-year performance period specified in the grant, subject to
exceptions through the respective vesting period of three years. Each grantee is granted a target award of PSUs, and may earn between 0% and
250% of the target amount depending on the Company’s performance against stated performance goals.
The following table sets forth non-vested PSUs at 100% of target amounts at December 31, 2019, 2018, and 2017.
Non-vested, December 31, 2016
Granted
Vested
Forfeited
Non-vested, December 31, 2017
Granted
Vested
Non-vested, December 31, 2018
Granted
Vested (1)
Forfeited
Non-vested, December 31, 2019
Number of Shares
(in Thousands)
Weighted-average
Grant Date
Fair Value
(per Share)
803
211
—
(27)
987
139
(19)
1,107
240
(761)
(57)
529
$
$
$
$
6.10
40.30
—
16.62
12.94
52.34
24.16
17.71
44.38
5.07
43.35
39.53
(1)
During the year ended December 31, 2019, approximately 1,520,000 PSUs granted in 2016 to the Company’s key senior management employees vested, based on the
attainment of certain performance- and market-based conditions. Of the 1,520,000 PSUs that vested during the year ended December 31, 2019, approximately 680,000 non-
issued shares were cancelled to cover the employee portion of income taxes related to such awards.
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 the 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 year ended December 31, 2019 was
$44.38. The fair value of each PSU grant is amortized monthly into compensation expense based on its respective vesting conditions over a three-
year period. Compensation cost is incurred based on the Company’s estimate of the final expected value of the award, which 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.
For the years ended December 31, 2019, 2018, and 2017, the Company recorded $3, $9, and $8 in stock-based compensation expense specific to
its PSUs, respectively. At December 31, 2019, based on the Company’s assessment of its performance goals, approximately 600,000 additional
shares may be awarded under the 2017 Plan.
F-58
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Employee Stock Purchase Plan
On January 26, 2017, the Company’s board of directors approved The Chemours Company Employee Stock Purchase Plan (the “ESPP”), which
was approved by Chemours’ stockholders on April 26, 2017. Under the ESPP, a total of 7,000,000 shares of Chemours’ common stock are reserved
and authorized for issuance to participating employees, as defined by the ESPP, which excludes executive officers of the Company. The ESPP
provides for consecutive 12-month offering periods, each with two purchase periods in March and September within those offering periods. The initial
offering period under the ESPP began on October 2, 2017. Participating employees are eligible to purchase the Company’s common stock at a
discounted rate equal to 95% of its fair value on the last trading day of each purchase period.
To date, the Company has executed open market transactions to purchase the Company’s common stock on behalf of its ESPP participants, which
amounted to 120,714 shares. During the year ended December 31, 2018, an additional 12,411 shares were issued from the Company’s treasury
stock to ESPP participants. The total amount of Chemours’ common stock received by employees in connection with the ESPP amounted to $4 at
December 31, 2019.
Note 25. Accumulated Other Comprehensive Loss
The following table sets forth the components of accumulated other comprehensive loss, net of income taxes, for the years ended December 31,
2019, 2018, and 2017.
Net Investment
Hedge
Cash Flow
Hedge
Cumulative
Translation
Adjustment
Employee
Benefits
Total
Balance at January 1, 2017
Other comprehensive (loss) income
Balance at December 31, 2017
Other comprehensive income (loss)
Balance at December 31, 2018
Other comprehensive income (loss)
Balance at December 31, 2019
$
$
22
(62)
(40)
15
(25)
15
(10)
$
$
—
—
—
6
6
(4)
2
$
$
(358)
200
(158)
(75)
(233)
2
(231)
$
$
(241)
(3)
(244)
(68)
(312)
202
(110)
$
$
(577)
135
(442)
(122)
(564)
215
(349)
Note 26. Financial Instruments
Derivative Instruments
Net Monetary Assets and Liabilities Hedge – Foreign Currency Forward Contracts
At December 31, 2019, the Company had 16 foreign currency forward contracts outstanding with an aggregate gross notional U.S. dollar equivalent
of $530, and an average maturity of one month. At December 31, 2018, the Company had 20 foreign currency forward contracts outstanding with an
aggregate gross notional U.S. dollar equivalent of $503, and an average maturity of one month. Chemours recognized a net loss of $2, and net gains
of $3 and $4 for the years ended December 31, 2019, 2018, and 2017, respectively, which were recorded in other income (expense), net in the
consolidated statements of operations.
Cash Flow Hedge – Foreign Currency Forward Contracts
At December 31, 2019, the Company had 150 foreign currency forward contracts outstanding under Chemours’ cash flow hedge program with an
aggregate notional U.S. dollar equivalent of $124, and an average maturity of five months. At December 31, 2018, the Company had 75 foreign
currency forward contracts outstanding under Chemours’ cash flow hedge program with an aggregate notional U.S. dollar equivalent of $143, and an
average maturity of four months. The Company recognized pre-tax gains of $6 and $10 for the years ended December 31, 2019 and 2018,
respectively, on its cash flow hedge within accumulated other comprehensive loss. For the years ended December 31, 2019 and 2018, $10 and $4
of gain was reclassified to the cost of goods sold from accumulated other comprehensive loss, respectively.
The Company expects to reclassify an approximate $3 of net gain from accumulated other comprehensive loss to the cost of goods sold over the
next 12 months, based on current foreign currency exchange rates.
F-59
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Net Investment Hedge – Foreign Currency Borrowings
The Company recognized pre-tax gains of $20 and $32, and a pre-tax loss of $86 for the years ended December 31, 2019, 2018, and 2017,
respectively, on its net investment hedges within accumulated other comprehensive loss. No amounts were reclassified from accumulated other
comprehensive loss for the Company’s net investment hedges during the years ended December 31, 2019, 2018, and 2017.
Fair Value of Derivative Instruments
The following table sets forth the fair value of the Company’s derivative assets and liabilities, and their level within the fair value hierarchy, at
December 31, 2019 and 2018.
Asset derivatives:
Foreign currency forward contracts
not designated as a hedging instrument
Foreign currency forward contracts
designated as a cash flow hedge
Total asset derivatives
Liability derivatives:
Foreign currency forward contracts
not designated as a hedging instrument
Total liability derivatives
Balance Sheet Location
December 31,
2019
2018
Accounts and notes receivable, net
Accounts and notes receivable, net
Other accrued liabilities
$
$
$
$
1
$
1
2
$
1
1
$
$
1
3
4
1
1
The Company’s foreign currency forward contracts are classified as Level 2 financial instruments within the fair value hierarchy 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 are subjected to tolerance and/or quality checks.
F-60
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Summary of Derivative Instruments
The following table sets forth the pre-tax changes in fair value of the Company’s derivative assets and liabilities for the years ended December 31,
2019, 2018, and 2017.
Gain (Loss) Recognized In
Cost of Goods Sold
Other Income
(Expense), Net
Accumulated Other
Comprehensive
Loss
$
$
$
— $
10
—
— $
4
—
— $
—
(2) $
—
—
3 $
—
—
4 $
—
—
6
20
—
10
32
—
(86)
Year Ended December 31,
2019
Foreign currency forward contracts not designated as a hedging
instrument
Foreign currency forward contracts designated as a cash flow hedge
Euro-denominated debt designated as a net investment hedge
2018
Foreign currency forward contracts not designated as a hedging
instrument
Foreign currency forward contracts designated as a cash flow hedge
Euro-denominated debt designated as a net investment hedge
2017
Foreign currency forward contracts not designated as a hedging
instrument
Euro-denominated debt designated as a net investment hedge
Note 27. Long-term Employee Benefits
Plans Covering Employees in the U.S.
On July 1, 2015, Chemours established a defined contribution 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, and the plan’s matching contributions vest immediately upon contribution. 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,
and the discretionary contribution vests for employees with at least three years of service. From time to time, Chemours provides additional
discretionary retirement savings contributions to eligible employees’ compensation.
In lieu of a defined benefit 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 upon the
employee’s length of service with DuPont at the time of the Separation. The enhancement ended in 2019.
F-61
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
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 the Separation and comparable to the DuPont plans in those countries. Obligations under such plans are either funded by
depositing funds with trustees, covered by insurance contracts, or unfunded.
In the fourth quarter of 2019, the Company, through its wholly-owned subsidiary Chemours Netherlands B.V., completed a settlement transaction
related to a significant portion of its Netherlands pension plan. The Company transferred the future risk and administration associated with the $932
of its inactive participants’ vested pension benefits to a third-party asset management company in the Netherlands. The irrevocability of the
transaction was contingent upon non-objection by the Dutch National Bank, which was received in October 2019. Following the receipt of non-
objection, the responsibility for the associated pension obligation was transferred to the third-party asset management company in December 2019,
thereby eliminating the Company’s exposure to the pension liabilities and formally effecting the settlement. At the time of settlement, a
remeasurement of plan assets and projected benefit obligations was performed, resulting in a $158 decrease to net pension assets and increase to
accumulated other comprehensive loss on the consolidated balance sheet. The cumulative loss associated with the inactive participants’ vested
pension benefits was then immediately reclassified from accumulated other comprehensive loss and recognized in earnings, resulting in a charge of
$380 recognized in other expense, net in the consolidated statements of operations. At December 31, 2019, the projected benefit obligations
associated with the plan’s active employees remained on the Company’s consolidated balance sheet.
The following table sets forth the Company’s net periodic pension income and amounts recognized in other comprehensive income (loss) for the
years ended December 31, 2019, 2018, and 2017.
$
Net periodic pension cost (income):
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service gain
Amortization of actuarial loss
Settlement loss
Net periodic pension cost (income)
Changes in plan assets and benefit obligations
recognized in other comprehensive income:
Net loss (gain)
Amortization of actuarial loss
Prior service gain
Amortization of prior service gain
Settlement loss
Effect of foreign exchange rates
(Benefit) cost recognized in other comprehensive income
Total net periodic pension income and cost (benefit) recognized in
other comprehensive income
$
2019
Year Ended December 31,
2018
2017
$
13
17
(48)
(2)
18
383
381
144
(18)
(5)
2
(383)
(7)
(267)
$
14
16
(58)
(2)
12
—
(18)
115
(16)
—
2
—
(8)
93
114
$
75
$
16
16
(75)
(2)
22
1
(22)
(24)
(24)
—
2
—
38
(8)
(30)
The following table sets forth the pre-tax amounts recognized in accumulated other comprehensive loss for the years ended December 31, 2019,
2018, and 2017.
Net loss
Prior service credit
Total amount recognized in accumulated other comprehensive loss $
$
151
(14)
137
$
$
419
(10)
409
$
$
329
(11)
318
2019
Year Ended December 31,
2018
2017
F-62
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
The following table sets forth summarized information on the Company’s pension plans at December 31, 2019 and 2018.
December 31,
2019
2018
$
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Plan participants’ contributions
Actuarial loss
Benefits paid
Plan amendments
Settlements and transfers
Currency translation
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return (loss) on plan assets
Employer contributions
Plan participants’ contributions
Benefits paid
Settlements and transfers
Currency translation
Fair value of plan assets at end of year
Total funded status at end of year
$
1,168
13
17
2
313
(37)
(5)
(945)
(19)
507
1,268
217
19
2
(37)
(945)
(24)
500
(7)
$
$
The following table sets forth the net amounts recognized in the Company’s consolidated balance sheets at December 31, 2019 and 2018.
Non-current assets
Current liabilities
Non-current liabilities
Total net amount recognized
December 31,
2019
2018
$
$
59
(2)
(64)
(7)
$
$
The accumulated benefit obligation for all pension plans was $445 and $1,106 as of December 31, 2019 and 2018, respectively.
1,177
14
16
2
45
(46)
—
2
(42)
1,168
1,363
(17)
15
2
(46)
2
(51)
1,268
100
174
(1)
(73)
100
F-63
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
The following tables set forth information related to the Company’s pension plans with projected and accumulated benefit obligations in excess of the
fair value of plan assets at December 31, 2019 and 2018.
Pension plans with projected benefit obligation in excess of plan assets
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
Pension plans with accumulated benefit obligation in excess of plan assets
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
Assumptions
$
$
December 31,
2019
2018
$
178
150
111
December 31,
2019
2018
$
178
150
111
177
149
103
177
149
103
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 plans’ actuaries as of the measurement date. The expected
rate of return on plan assets reflects economic assumptions applicable to each country.
The following tables set forth the assumptions that have been used to determine the Company’s benefit obligations and net benefit cost at December
31, 2019 and 2018.
Weighted-average assumptions used to determine benefit obligations
Discount rate
Rate of compensation increase (1)
December 31,
2019
2018
1.4%
2.6%
2.0%
2.5%
(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
Discount rate
Rate of compensation increase (1)
Expected return on plan assets
December 31,
2019
2018
2.0%
2.5%
4.1%
1.9%
2.5%
4.1%
(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.
F-64
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Plan Assets
Each pension plan’s assets are invested through either an insurance vehicle, a master trust fund, or a stand-alone pension fund. The strategic asset
allocation for each plan is selected by management, together with the pension board, where appropriate, reflecting the results of comprehensive
asset and liability modeling. For assets under its control, 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 following table sets forth the weighted-average allocation for the Company’s pension plan assets at December 31, 2019 and 2018.
Cash and cash equivalents
U.S. and non-U.S. equity securities
Fixed income securities
Total weighted-average allocation
December 31,
2019
2018
8%
52%
40%
100%
5%
45%
50%
100%
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.
F-65
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
The following tables set forth the fair values of the Company’s pension assets by level within the fair value hierarchy at December 31, 2019 and
2018.
Asset category:
Debt - government issued
Debt - corporate issued
U.S. and non-U.S. equities
Mututal funds
Derivatives - asset position
Derivatives - liability position
Cash and cash equivalents
Other
Total pension assets before pension receivables
Pension trust payables, net (1)
Total pension assets
(1)
Payables are primarily for investments purchased and received but not yet paid.
Asset category:
Debt - government issued
Debt - corporate issued
U.S. and non-U.S. equities
Mututal funds
Derivatives - asset position
Derivatives - liability position
Cash and cash equivalents
Other
Total pension assets before pension receivables
Pension trust receivables, net (1)
Total pension assets
$
$
$
$
Fair Value Measurements at December 31, 2019
Level 1
Total
Level 2
$
$
150
51
102
135
28
—
41
2
509
(9)
500
9
47
101
—
—
—
41
2
200
$
$
Fair Value Measurements at December 31, 2018
Level 1
Total
Level 2
$
$
487
130
264
296
9
(5)
67
12
1,260
8
1,268
3
33
263
—
—
—
67
8
374
$
$
141
4
1
135
28
—
—
—
309
484
97
1
296
9
(5)
—
4
886
(1)
Receivables are primarily for investment income earned but not yet received.
For pension plan assets classified as Level 1 instruments within the fair value hierarchy, 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 plan assets classified as Level 2 instruments within the fair value hierarchy, 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, recognized vendors of market data and subjected to tolerance and/or 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.
F-66
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Cash Flows – Defined Benefit Plans
Employer Contributions
For the years ended December 31, 2019, 2018, and 2017, Chemours contributed $19, $15, and $38, respectively, to its defined benefit plans.
Of the contributions made in 2017, $10 relates to the settlement of the U.S. Pension Restoration Plan (“U.S. PRP”), which was a supplemental
pension plan for certain U.S. employees. The liability associated with the U.S. PRP was transferred to Chemours from DuPont at the Separation
Date, at which point the plan ceased accepting new participants. In October 2017, the Company made a cash payment of $10 to settle the remaining
liability attributable to the remaining participants in the U.S. PRP.
Chemours expects to contribute $18 to its pension plans in 2020.
Future Benefit Payments
The following table sets forth the benefit payments that are expected to be paid by the plans over the next five years and the five years thereafter as
of December 31, 2019.
2020
2021
2022
2023
2024
2025 to 2029
Cash Flows – Defined Contribution Plan
Employer Contributions
Year Ended
December 31,
$
13
9
10
13
15
87
For the years ended December 31, 2019, 2018, and 2017, Chemours contributed $34, $51, and $45, respectively, to its defined contribution plan.
F-67
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Note 28. Geographic and Segment Information
Geographic Information
The following table sets forth the geographic locations of the Company’s net sales and property, plant, and equipment, net as of, and for the years
ended December 31, 2019, 2018, and 2017.
2019
Year Ended December 31,
2018
2017
North America
Asia Pacific
Europe, the Middle East, and Africa
Latin America (2)
Total
Net Sales (1)
$
Net Sales (1)
$
Net Sales (1)
$
Property, Plant,
and
Equipment, Net
2,533
$
121
294
611
3,559
$
2,144
1,543
1,163
676
5,526
Property, Plant,
and
Equipment, Net
2,279
$
124
293
595
3,291
$
2,378
1,720
1,685
855
6,638
Property, Plant,
and
Equipment, Net
2,018
$
131
302
557
3,008
$
2,255
1,593
1,506
829
6,183
$
$
$
(1)
(2)
Net sales are attributed to countries based on customer location.
Latin America includes Mexico.
Segment Information
Chemours’ operations consist of three reportable segments based on similar economic characteristics, the nature of products and production
processes, end-use markets, channels of distribution, and regulatory environments: Fluoroproducts, Chemical Solutions, and Titanium Technologies.
Corporate costs and certain legal and environmental expenses, stock-based compensation expenses, and foreign exchange gains and losses
arising from the remeasurement of balances in currencies other than the functional currency of the Company’s legal entities are reflected in
Corporate and Other.
Segment net sales include transfers to another reportable segment. 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 R&D facilities and amortization of other intangible assets, excluding any
write-downs of assets. Segment net assets include net working capital, net property, plant, and equipment, and other non-current operating assets
and liabilities of the segment. This is the measure of segment assets reviewed by the Company’s Chief Operating Decision Maker (“CODM”).
Adjusted earnings before interest, taxes, depreciation, and amortization (“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 post-retirement employee benefit costs, which represent the components of net periodic pension
(income) costs excluding the service cost component;
exchange (gains) losses included in other income (expense), net;
restructuring, asset-related, and other charges;
asset impairments;
(gains) losses on sales of assets and businesses; and,
other items not considered indicative of the Company’s ongoing operational performance and expected to occur infrequently.
F-68
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
The following table sets forth certain summary financial information for the Company’s reportable segments as of, and for the years ended December
31, 2019, 2018, and 2017.
Year Ended December 31,
2019
Net sales to external customers
Adjusted EBITDA
Depreciation and amortization
Equity in earnings of affiliates
Total assets
Net assets
Investments in affiliates
Purchases of property, plant, and equipment
2018
Net sales to external customers
Adjusted EBITDA
Depreciation and amortization
Equity in earnings of affiliates
Total assets
Net assets
Investments in affiliates
Purchases of property, plant, and equipment
2017
Net sales to external customers
Adjusted EBITDA
Depreciation and amortization
Equity in earnings of affiliates
Total assets
Net assets
Investments in affiliates
Purchases of property, plant, and equipment
$
$
$
Fluoroproducts
Chemical
Solutions
Titanium
Technologies
Segment Total
$
$
$
2,648
578
136
29
2,582
2,283
162
201
2,862
783
117
43
2,744
2,309
160
274
2,654
669
109
33
2,311
1,842
173
249
$
$
$
533
80
22
—
574
495
—
40
602
64
20
—
623
506
—
75
571
57
18
—
581
460
—
65
$
$
$
2,345
505
121
—
2,291
1,296
—
121
3,174
1,055
119
—
2,354
1,487
—
91
2,958
862
118
—
2,502
1,785
—
65
5,526
1,163
279
29
5,447
4,074
162
362
6,638
1,902
256
43
5,721
4,302
160
440
6,183
1,588
245
33
5,394
4,087
173
379
The following table sets forth a reconciliation for instances in which the above summary financial information for the Company’s reportable segments
does not sum to consolidated amounts. A reconciliation of Segment Adjusted EBITDA to consolidated results can be found in the table immediately
thereafter.
Year Ended December 31,
2019
Depreciation and amortization
Total assets
Net assets
Purchases of property, plant, and equipment
2018
Depreciation and amortization
Total assets
Net assets
Purchases of property, plant, and equipment
2017
Depreciation and amortization
Total assets
Net assets
Purchases of property, plant, and equipment
Segment Total
Corporate and Other
Total Consolidated
32
1,811
(3,379)
119
28
1,641
(3,282)
58
28
1,899
(3,222)
32
311
7,258
695
481
284
7,362
1,020
498
273
7,293
865
411
279
5,447
4,074
362
256
5,721
4,302
440
245
5,394
4,087
379
F-69
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
The following table sets forth a reconciliation of Segment Adjusted EBITDA to the Company’s consolidated net income (loss) before income taxes for
the years ended December 31, 2019, 2018, and 2017.
Segment Adjusted EBITDA
Corporate and Other Adjusted EBITDA
Interest expense, net
Depreciation and amortization
Non-operating pension and other post-retirement employee benefit (cost)
income (1)
Exchange (losses) gains, net
Restructuring, asset-related, and other charges (2)
Loss on extinguishment of debt
Gain on sales of assets and businesses (3)
Transaction costs (4)
Legal and environmental charges (5)
Other charges
(Loss) income before income taxes
2019
$
$
Year Ended December 31,
2018
2017
$
1,163
(143)
(208)
(311)
(368)
(2)
(87)
—
10
(3)
(175)
—
(124)
$
1,902
(162)
(195)
(284)
27
1
(49)
(38)
45
(9)
(82)
(1)
1,155
$
$
$
1,588
(166)
(214)
(273)
34
3
(57)
(1)
22
(3)
(9)
(12)
912
(1)
(2)
(3)
(4)
(5)
The year ended December 31, 2019 includes a $380 settlement loss related to a significant portion of the Company’s Netherlands pension plan, specific to the vested
pension benefits of the inactive participants. See “Note 27 – Long-term Employee Benefits” for further details.
Includes restructuring, asset-related, and other charges, which are discussed in further detail in “Note 7 – Restructuring, Asset-related, and Other Charges.”
The year ended December 31, 2019, included a non-cash gain of $9 associated with the sale of the Company’s Repauno, New Jersey site. The year ended December 31,
2018, included gains of $3 and $42 associated with the sales of the Company’s East Chicago, Indiana and Linden, New Jersey sites, respectively. The year ended
December 31, 2017 included gains of $13 and $12 associated with the sale of the Company’s land in Repauno, New Jersey that was previously deferred and realized upon
meeting certain milestones, and for the sale of its Edge Moor, Delaware plant site, respectively, net of certain losses on other disposals.
Includes costs associated with the Company’s debt transactions, as well as accounting, legal, and bankers’ transaction costs incurred in connection with the Company’s
strategic initiatives.
Legal charges pertains to litigation settlements, PFOA drinking water treatment accruals, and other legal charges. Environmental charges pertains to estimated liabilities
associated with on-site remediation, off-site groundwater remediation, and toxicity studies related to Fayetteville. The year ended December 31, 2019 included $168 in
additional charges for the approved final Consent Order associated with certain matters at Fayetteville. The year ended December 31, 2018 included $63 in additional
charges for the estimated liability associated with Fayetteville. See “Note 22 – Commitments and Contingent Liabilities” for further details.
The following table sets forth the Company’s net sales to external customers by product group for the years ended December 31, 2019, 2018, and
2017.
Fluorochemicals
Fluoropolymers
Mining solutions
Performance chemicals and intermediates
Titanium dioxide and other minerals
Divested businesses (1)
Total net sales
2019
Year Ended December 31,
2018
2017
$
$
1,318
1,330
268
265
2,345
—
5,526
$
$
1,497
1,365
289
313
3,174
—
6,638
$
$
1,378
1,276
261
306
2,958
4
6,183
(1)
Inclusive of the Company’s C&D and Sulfur businesses, as well as its Aniline facility in Beaumont, Texas, which were all sold in 2016.
F-70
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Note 29. Quarterly Financial Data (Unaudited)
The following table sets forth a summary of the Company’s quarterly results of operations for the years ended December 31, 2019 and 2018.
2019
Net sales
Cost of goods sold
Income (loss) before income taxes
Net income (loss)
Net income (loss) attributable to Chemours
Basic earnings (loss) per share of common stock
Diluted earnings (loss) per share of common stock
2018
Net sales
Cost of goods sold
Income before income taxes
Net income
Net income attributable to Chemours
Basic earnings per share of common stock
Diluted earnings per share of common stock
$
$
$
$
March 31,
1,376
1,080
107
94
94
0.56
0.55
March 31,
1,730
1,193
381
297
297
1.63
1.58
(1)
Individual quarters may not sum to full year amounts due to rounding.
Note 30. Guarantor Condensed Consolidating Financial Information
For the Three Months Ended
June 30,
September 30,
$
For the Three Months Ended
June 30,
September 30,
$
1,408
1,085
133
96
96
0.58
0.57
1,816
1,259
323
282
281
1.58
1.53
December 31,
$
1,353
1,203
(454)
(317)
(317)
(1.94)
(1.94)
December 31,
$
1,464
1,064
182
142
142
0.83
0.81
$
$
Full Year (1),
5,526
4,463
(124)
(52)
(52)
(0.32)
(0.32)
Full Year (1),
6,638
4,667
1,155
996
995
5.62
5.45
1,390
1,096
91
76
76
0.46
0.46
1,628
1,151
269
275
275
1.56
1.51
The following guarantor condensed consolidating financial information is included in accordance with Rule 3-10 of Regulation S-X (“Rule 3-10”) in
connection with the subsidiary guarantees of the “Notes” (collectively, the 2023 Dollar Notes, the 2025 Notes, the 2026 Euro Notes, and the 2027
Notes), in each case, issued by The Chemours Company (the “Parent Issuer”). As of the dates indicated, each series of the Notes was fully and
unconditionally guaranteed, jointly and severally, on a senior unsecured basis, subject to certain exceptions, by the same group of subsidiaries of the
Parent Issuer (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”). Pursuant to the indentures
governing the Notes, the Guarantor Subsidiaries will be automatically released from those guarantees upon the occurrence of certain customary
release provisions.
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, 2019, 2018, and 2017;
the consolidating balance sheets at December 31, 2019 and 2018; and,
the consolidating statements of cash flows for the years ended December 31, 2019, 2018, and 2017.
The following guarantor condensed financial information is presented using the equity method of accounting for the Company’s investments in its
wholly-owned subsidiaries. Under the equity method, the investments in subsidiaries are recorded at cost and adjusted for the Company’s share of
its 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 included herein may not necessarily be
indicative of the financial positions, results of operations, or cash flows of the Company’s subsidiaries had they operated as independent entities, and
should be read in conjunction with the consolidated financial statements and the related notes thereto.
F-71
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Condensed Consolidating Statements of Comprehensive Income (Loss)
Year Ended December 31, 2019
Non-
Guarantor
Subsidiaries
Eliminations
and
Adjustments
Guarantor
Subsidiaries
Parent Issuer
$
Net sales
Cost of goods sold
Gross profit
Selling, general, and administrative expense
Research and development expense
Restructuring, asset-related, and other charges
Total other operating expenses
Equity in earnings of affiliates
Equity in earnings (loss) of subsidiaries
Interest (expense) income, net
Intercompany interest income (expense), net
Other income (expense), net
(Loss) income before income taxes
Benefit from income taxes
Net (loss) income
Less: Net income attributable to non-controlling
interests
Net (loss) income attributable to Chemours
Comprehensive income (loss) attributable to
Chemours
$
$
— $
—
—
19
—
—
19
—
73
(209)
41
21
(93)
(41)
(52)
—
(52) $
3,357 $
3,068
289
406
73
74
553
—
(3)
—
16
122
(129)
(28)
(101)
—
(101) $
3,656 $
2,882
774
141
7
13
161
29
—
1
(57)
(417)
169
(2)
171
—
171 $
Consolidated
5,526
4,463
1,063
548
80
87
715
29
—
(208)
—
(293)
(124)
(72)
(52)
(1,487) $
(1,487)
—
(18)
—
—
(18)
—
(70)
—
—
(19)
(71)
(1)
(70)
—
(70) $
—
(52)
163
163 $
(101) $
371 $
(270) $
F-72
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Condensed Consolidating Statements of Comprehensive Income (Loss)
Year Ended December 31, 2018
Non-
Guarantor
Subsidiaries
Eliminations
and
Adjustments
Guarantor
Subsidiaries
Parent Issuer
$
Net sales
Cost of goods sold
Gross profit
Selling, general, and administrative expense
Research and development expense
Restructuring, asset-related, and other charges
Total other operating expenses
Equity in earnings of affiliates
Equity in earnings of subsidiaries
Interest (expense) income, net
Loss on extinguishment of debt
Intercompany interest income (expense), net
Other income (expense), net
Income before income taxes
(Benefit from) provision for income taxes
Net income
Less: Net income attributable to non-controlling
interests
Net income attributable to Chemours
Comprehensive income attributable to Chemours
3,974 $
3,112
862
485
76
46
607
—
2
5
—
10
199
471
98
373
—
373 $
375 $
4,484 $
3,380
1,104
163
6
3
172
43
—
10
—
(57)
(40)
888
111
777
1
776 $
637 $
Consolidated
6,638
4,667
1,971
657
82
49
788
43
—
(195)
(38)
—
162
1,155
159
996
(1,820) $
(1,825)
5
(24)
—
—
(24)
—
(1,157)
—
—
—
(22)
(1,150)
—
(1,150)
—
(1,150) $
(1,012) $
1
995
873
— $
—
—
33
—
—
33
—
1,155
(210)
(38)
47
25
946
(50)
996
$
$
—
996 $
873 $
F-73
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Condensed Consolidating Statements of Comprehensive Income (Loss)
Year Ended December 31, 2017
Non-
Guarantor
Subsidiaries
Eliminations
and
Adjustments
Guarantor
Subsidiaries
Parent Issuer
$
Net sales
Cost of goods sold
Gross profit
Selling, general, and administrative expense
Research and development expense
Restructuring, asset-related, and other charges
Total other operating expenses
Equity in earnings of affiliates
Equity in earnings of subsidiaries
Interest (expense) income, net
Loss on extinguishment of debt
Intercompany interest income (expense), net
Other income (expense), net
Income before income taxes
(Benefit from) provision for income taxes
Net income
Less: Net income attributable to non-controlling
interests
Net income attributable to Chemours
Comprehensive income attributable to Chemours
3,887 $
3,084
803
449
74
56
579
—
—
3
—
—
139
366
117
249
—
249 $
253 $
4,030 $
3,045
985
179
7
1
187
33
—
3
—
(64)
(21)
749
114
635
1
634 $
828 $
Consolidated
6,183
4,438
1,745
626
81
57
764
33
—
(214)
(1)
—
113
912
165
747
(1,734) $
(1,691)
(43)
(38)
—
—
(38)
—
(849)
—
—
—
(34)
(888)
(4)
(884)
—
(884) $
(1,081) $
1
746
881
— $
—
—
36
—
—
36
—
849
(220)
(1)
64
29
685
(62)
747
$
$
—
747 $
881 $
F-74
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Condensed Consolidating Balance Sheets
Year Ended December 31, 2019
Non-
Guarantor
Subsidiaries
Eliminations
and
Adjustments
Guarantor
Subsidiaries
Consolidated
Parent Issuer
Assets
Current assets:
Cash and cash equivalents
Accounts and notes receivable, net
Intercompany receivable
Inventories
Prepaid expenses and other
Total current assets
Property, plant, and equipment
Less: Accumulated depreciation
Property, plant, and equipment, net
Operating lease right-of-use assets
Goodwill and other intangible assets, net
Investments in affiliates
Investments in subsidiaries
Intercompany notes receivable
Other assets
Total assets
Liabilities
Current liabilities:
$
$
Accounts payable
$
Short-term and current maturities of long-term debt
Intercompany payable
Other accrued liabilities
Total current liabilities
Long-term debt, net
Operating lease liabilities
Intercompany notes payable
Deferred income taxes
Other liabilities
Total liabilities
Commitments and contingent liabilities
Equity
Total Chemours stockholders’ equity
Non-controlling interests
Total equity
Total liabilities and equity
$
104 $
53
1,023
552
60
1,792
7,207
(4,697)
2,510
273
160
—
148
—
140
5,023 $
528 $
11
138
294
971
150
233
—
45
551
1,950
3,073
—
3,073
5,023 $
839 $
621
180
612
15
2,267
2,206
(1,157)
1,049
21
14
162
—
—
145
3,658 $
395 $
110
345
171
1,021
—
12
1,250
56
82
2,421
1,231
6
1,237
3,658 $
— $
—
(1,205)
(85)
6
(1,284)
—
—
—
—
—
—
(4,225)
(1,250)
—
(6,759) $
— $
—
(1,203)
(2)
(1,205)
—
—
(1,250)
—
—
(2,455)
(4,304)
—
(4,304)
(6,759) $
943
674
—
1,079
81
2,777
9,413
(5,854)
3,559
294
174
162
—
—
292
7,258
923
134
—
484
1,541
4,026
245
—
118
633
6,563
689
6
695
7,258
— $
—
2
—
—
2
—
—
—
—
—
—
4,077
1,250
7
5,336 $
— $
13
720
21
754
3,876
—
—
17
—
4,647
689
—
689
5,336 $
F-75
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Condensed Consolidating Balance Sheets
Year Ended December 31, 2018
Non-
Guarantor
Subsidiaries
Eliminations
and
Adjustments
Guarantor
Subsidiaries
Consolidated
Parent Issuer
Assets
Current assets:
Cash and cash equivalents
Accounts and notes receivable, net
Intercompany receivable
Inventories
Prepaid expenses and other
Total current assets
Property, plant, and equipment
Less: Accumulated depreciation
Property, plant, and equipment, net
Goodwill and other intangible assets, net
Investments in affiliates
Investments in subsidiaries
Intercompany notes receivable
Other assets
Total assets
Liabilities
Current liabilities:
Accounts payable
Current maturities of long-term debt
Intercompany payable
Other accrued liabilities
Total current liabilities
Long-term debt, net
Intercompany notes payable
Deferred income taxes
Other liabilities
Total liabilities
Commitments and contingent liabilities
Equity
Total Chemours stockholders’ equity
Non-controlling interests
Total equity
Total liabilities and equity
239 $
297
1,057
483
58
2,134
6,870
(4,591)
2,279
167
—
11
—
154
4,745 $
637 $
—
92
341
1,070
57
—
143
372
1,642
3,103
—
3,103
4,745 $
962 $
564
91
749
26
2,392
2,122
(1,110)
1,012
14
160
—
—
274
3,852 $
500 $
—
360
198
1,058
—
1,150
82
85
2,375
1,471
6
1,477
3,852 $
— $
—
(1,150)
(85)
—
(1,235)
—
—
—
—
—
(4,498)
(1,150)
(8)
(6,891) $
— $
—
(1,150)
(1)
(1,151)
—
(1,150)
(16)
—
(2,317)
(4,574)
—
(4,574)
(6,891) $
1,201
861
—
1,147
84
3,293
8,992
(5,701)
3,291
181
160
—
—
437
7,362
1,137
13
—
559
1,709
3,959
—
217
457
6,342
1,014
6
1,020
7,362
$
$
$
$
— $
—
2
—
—
2
—
—
—
—
—
4,487
1,150
17
5,656 $
— $
13
698
21
732
3,902
—
8
—
4,642
1,014
—
1,014
5,656 $
F-76
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Condensed Consolidating Statements of Cash Flows
Cash flows from operating activities
Parent Issuer
Year Ended December 31, 2019
Non-
Guarantor
Subsidiaries
Eliminations
and
Adjustments
Guarantor
Subsidiaries
Consolidated
Cash provided by (used for) operating activities $
140 $
(892) $
1,684 $
(282) $
Cash flows from investing activities
Purchases of property, plant, and equipment
Intercompany investing activities
Acquisition of business, net
Proceeds from sales of assets and businesses, net
Proceeds from life insurance policies
Foreign exchange contract settlements, net
Cash used for investing activities
Cash flows from financing activities
Proceeds from revolving loan
Repayments on revolving loan
Proceeds from accounts receivable securitization
facility
Debt repayments
Payments on finance leases
Purchases of treasury stock, at cost
Intercompany financing activities (1)
Proceeds from exercised stock options, net
Payments related to tax withholdings on vested
stock awards
Payments of dividends
Cash (used for) provided by financing activities
Effect of exchange rate changes on cash and cash
equivalents
Decrease in cash and cash equivalents
Cash and cash equivalents at January 1,
Cash and cash equivalents at December 31,
$
—
—
—
—
—
—
—
150
(150)
—
(13)
—
(322)
380
9
(30)
(164)
(140)
—
—
—
— $
(403)
26
(10)
7
1
(2)
(381)
—
—
—
(5)
(1)
—
1,144
—
—
—
1,138
—
(135)
239
104 $
(78)
(398)
—
2
—
—
(474)
—
—
128
(19)
(2)
—
(1,434)
—
—
—
(1,327)
(6)
(123)
962
839 $
—
372
—
—
—
—
372
—
—
—
—
—
—
(90)
—
—
—
(90)
—
—
—
— $
650
(481)
—
(10)
9
1
(2)
(483)
150
(150)
128
(37)
(3)
(322)
—
9
(30)
(164)
(419)
(6)
(258)
1,201
943
(1)
During the year ended December 31, 2019, the Company received $1,034 in collections on its accounts receivable sold into the SPE under the Securitization Facility, which,
inclusive of net borrowings, led to a total of $1,144 received by the SPE and distributed to the Guarantor Subsidiaries during the period.
F-77
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Condensed Consolidating Statements of Cash Flows
Cash flows from operating activities
Parent Issuer
Year Ended December 31, 2018
Non-
Guarantor
Subsidiaries
Eliminations
and
Adjustments
Guarantor
Subsidiaries
Consolidated
Cash (used for) provided by operating activities $
(159) $
10 $
1,289 $
— $
1,140
Cash flows from investing activities
Purchases of property, plant, and equipment
Acquisition of business, net
Proceeds from sales of assets and businesses, net
Intercompany investing activities
Foreign exchange contract settlements, net
Cash used for investing activities
Cash flows from financing activities
Proceeds from issuance of debt, net
Debt repayments
Payments related to extinguishment of debt
Payments of debt issuance costs
Purchases of treasury stock, at cost
Intercompany financing activities
Proceeds from exercised stock options, net
Payments related to tax withholdings on vested
restricted stock units
Payments of dividends
Cash provided by (used for) financing activities
Effect of exchange rate changes on cash and cash
equivalents
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at January 1,
Cash and cash equivalents at December 31,
$
—
—
—
—
—
—
520
(679)
(29)
(12)
(644)
1,152
16
(17)
(148)
159
—
—
—
— $
(390)
(37)
46
(153)
2
(532)
—
—
—
—
—
—
—
—
—
—
—
(522)
761
239 $
(108)
—
—
(999)
—
(1,107)
—
—
—
—
—
—
—
—
—
—
(15)
167
795
962 $
—
—
—
1,152
—
1,152
—
—
—
—
—
(1,152)
—
—
—
(1,152)
—
—
—
— $
(498)
(37)
46
—
2
(487)
520
(679)
(29)
(12)
(644)
—
16
(17)
(148)
(993)
(15)
(355)
1,556
1,201
F-78
The Chemours Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share amounts and par values)
Condensed Consolidating Statements of Cash Flows
Cash flows from operating activities
Parent Issuer
Year Ended December 31, 2017
Non-
Guarantor
Subsidiaries
Eliminations
and
Adjustments
Guarantor
Subsidiaries
Consolidated
Cash (used for) provided by operating activities $
(132) $
603 $
169 $
Cash flows from investing activities
Purchases of property, plant, and equipment
Proceeds from sales of assets and businesses, net
Intercompany investing activities
Foreign exchange contract settlements, net
Cash used for investing activities
Cash flows from financing activities
Intercompany short-term borrowings, net
Proceeds from issuance of debt, net
Debt repayments
Payments related to extinguishment of debt
Payments of debt issuance costs
Purchases of treasury stock, at cost
Proceeds from exercised stock options, net
Payments related to tax withholdings on vested
restricted stock units
Payments of dividends
Cash provided by financing activities
Effect of exchange rate changes on cash and cash
equivalents
Increase in cash and cash equivalents
Cash and cash equivalents at January 1,
Cash and cash equivalents at December 31,
$
—
—
—
—
—
(220)
495
(27)
(1)
(6)
(106)
31
(12)
(22)
132
—
—
—
— $
(327)
39
220
2
(66)
—
—
—
—
—
—
—
—
—
—
—
537
224
761 $
(84)
—
—
—
(84)
—
—
—
—
—
—
—
—
—
—
32
117
678
795 $
— $
—
—
(220)
—
(220)
220
—
—
—
—
—
—
—
—
220
—
—
—
— $
640
(411)
39
—
2
(370)
—
495
(27)
(1)
(6)
(106)
31
(12)
(22)
352
32
654
902
1,556
F-79
2019
Chemours Stakeholders,
Focused. Disciplined. Relentless.
Five years into our journey, our young company is strengthening our leadership position in key markets, remaining relentlessly focused on creating
shareholder value. All the while, we are helping move our industry into a more environmentally and socially conscious future. Every day, across the globe,
our employees are resolute in their pursuit of growth opportunities and exceeding the expectations of our customers.
At the same time, we’ve faced our share of obstacles. Today, we are taking several steps to shape a future for Chemours where our product innovation
and a renewed level of focus and discipline across our company will power us to new heights.
In 2019, our company achieved net sales of $5.5 billion, adjusted* EBITDA of $1.02 billion, and adjusted* earnings per share of $2.51.
Weakening macro-economic conditions and some self-inflicted wounds affected our financial performance. We saw softness in two of our key end markets,
the automotive and electronics industries, which are particularly vulnerable to trade uncertainties. Our Titanium Technologies business lost greater market
share than anticipated early in 2019 with the simultaneous installation of new contract structures and our industry-first Ti-Pure™ Flex online portal, both key
elements of our Ti-Pure™ Value Stabilization Strategy. We also experienced costly production setbacks in our Fluoroproducts supply chain.
Despite these challenges, we achieved several milestones of note. We delivered record adjusted* EBITDA in our Chemical Solutions segment, we
captured double-digit sales volume growth of Opteon™ refrigerants in the automotive market, and we returned $486 million to shareholders via share
repurchases and dividends.
$5.5B
Net sales
$1.02B
$2.51
Adjusted*
EBITDA
Adjusted*
earnings per share
$486M
Returned to
shareholders
in 2019 via share repurchases and dividends
Here are some additional 2019 highlights:
Positioning Chemours for future growth . . .
• In Corpus Christi, Texas, we ramped up production at our new Opteon™
refrigerants plant, a $300 million facility that will triple our global
capacity of this valuable low global warming refrigerant. The Opteon™
products manufactured in Corpus Christi will allow us to capture addi-
tional opportunities, as the world transitions to the next generation of
more sustainable refrigerants.
• We acquired Southern Ionics Minerals, a responsible mining company
with assets in Georgia and Florida, increasing our company’s internal
supply of high-quality ilmenite ore used in the production of titanium
dioxide.
• Hundreds of our scientists moved into our new 312,000-square-foot,
state-of-the-art research facility, the Chemours Discovery Hub
(CDH), located on the University of Delaware’s STAR Campus. At the
CDH, our world-class scientists will harness chemistry to create the
next generation of Chemours ingredients and products that make a
positive difference in the world, including 5G communications
equipment, new energy vehicles, and wearable technologies.
• We launched several new products to serve our customers in
fast-growing markets, including Nafion™ NC700 ion-exchange
membranes for fuel cells and Ti-Pure™ TS-4567 pigment for
printing inks.
• In December, we simplified our product portfolio and
manufacturing footprint with the sale of our methylamines and
methylamides business in Belle, West Virginia.
Strengthening our key-market leadership positions . . .
• We captured increased adoption of Opteon™ refrigerants in
automotive and stationary air conditioning markets around the world,
including several high-profile customer wins. For instance, automotive
OEMs are expected to fully convert to HFOs in the United States by
2021 and Japan by 2023. We are also excited to announce Opteon™
is now the official refrigerant solution of the National Hockey League®
and is being used to cool the rink at the Pepsi Center, home of the
Colorado Avalanche®. Additionally, Chemours has significantly
stepped up its efforts to help European Union regulators crack
down on illegal imports of less sustainable HFCs from China into
Europe.
• We regained more stable relationships with titanium dioxide
customers as our contract terms and Ti-Pure™ Flex portal gained
acceptance, demonstrating market share recovery in the second half
of the year.
Trailblazing environmental and social responsibility for our
industry . . .
• In Fayetteville, North Carolina, we designed and installed a thermal
oxidizer that will eliminate 99.9% of our air emissions of
fluorinated compounds at this site. Our $100 million thermal oxidizer
was developed in-house by our sustainability and engineering teams,
and we believe this technology will become an industry-wide model for
emissions control at manufacturing sites around the world.
• We built on our Corporate Responsibility Commitments work,
including the ten ambitious goals we set for ourselves to achieve by
2030. We published our first data baselines against these ten goals,
which we’ll use to measure our progress in the future. We also expanded
our Future of Chemistry Scholarships program, and hundreds of our
employees volunteered around the world during our first Corporate
Responsibility Commitments day of community service.
These accomplishments notwithstanding, we are committed to taking
the lessons learned in 2019 to create a more disciplined company,
laser-focused on manufacturing excellence and commercial execution.
We will concentrate our efforts on strategically capturing opportunities
in fast-growing end-markets, striving for best-in-class reliability at
our plants, and continuing to streamline our product portfolio and
manufacturing footprint.
That, plus the tenacity and resilience—the grit—our workforce has
demonstrated from our start in 2015 and the trust and confidence of
our customers and investors will power Chemours to new heights.
Thank you for being with us on this exciting journey.
Best regards,
Richard H. Brown Mark P. Vergnano
Chairman of the Board
President & Chief Executive Officer
* See the definitions and reconciliations of all non–Generally Accepted Accounting Principles (GAAP) financial measures to their most directly comparable financial measures calculated and presented in accor-
dance with GAAP starting on page 57 of the Form 10-K. Forward-looking statements are subject to risk, uncertainties, and assumptions, all of which are described in our public filings.
10
Corporate Responsibility
Commitment Goals
By 2030, we aim to achieve the following:
Inspired People
Safety Excellence
• Improve employee, contractor, process, and distribution safety performance by
at least 75%.
Vibrant Communities
• Invest $50M in our communities to increase access to STEM skills and improve
lives through environment and safety programs.
Empowered Employees
• 50% of all positions globally filled with women.
• 20% of all US positions filled with ethnically diverse employees.
Shared Planet
Climate
• Reduce greenhouse gas emission intensity by 60%.
• Progress our plan to become carbon positive by 2050.
Water
• Reduce air and water process emissions of fluorinated organic chemicals by
99% or greater.
Waste
• Reduce landfill volume intensity by 70%.
Evolved Portfolio
Sustainable Offerings
• 50% or more of our revenues will be from solutions that make a specific
contribution to the 2030 United Nations Sustainable Development Goals.
Sustainable Supply Chain
• Baseline the sustainability performance of 80% of suppliers by spend and
demonstrate 15% improvement.
Annual Report 2019.indd 2-3
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LEADERSHIP TEAM
BOARD OF DIRECTORS
Mark P. Vergnano
President & Chief Executive Officer
Mark E. Newman
SVP & Chief Operating Officer
Sameer Ralhan
SVP, Chief Financial Officer
& Treasurer
Edwin Sparks
President, Fluoroproducts and
Chemical Solutions
E. Bryan Snell
President, Titanium Technologies
Susan Kelliher
SVP, People & Health Services
Dave Shelton
SVP, General Counsel
& Corporate Secretary
Erich Parker
SVP, Corporate Communications
& Chief Brand Officer
Curtis V. Anastasio
Director
Bradley J. Bell
Director
Richard H. Brown
Chairman of the Board
Mary B. Cranston
Director
Curtis J. Crawford
Director
Dawn L. Farrell
Director
Erin N. Kane
Director
Sean D. Keohane
Director
Mark P. Vergnano
Director
Corporate Headquarters:
The Chemours Company
1007 Market Street
P.O. Box 2047
Wilmington, Delaware 19801
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
Overnight Mail Delivery:
462 South 4th Street, Suite 1600
Louisville, Kentucky 40202
Regular Mail Delivery:
P.O. Box 505000
Louisville, Kentucky 40233-5000
computershare.com/investor
US & Canada: 1 866 478 8569
International: 1 781 575 2729
©2020 The Chemours Company. Chemours™ and the Chemours Logo are trademarks of The Chemours Company.
Tenacious
Determined
Committed
Motivated
Persistent
Resolute
Engrossed
Dedicated
Fixated
Rapt
Disciplined
Absorbed
Purposeful
Galvanized
Decisive
Centered
Driven
Dogged
Persistent
Focused.
THE CHEMOURS COMPANY
2019 ANNUAL REPORT
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