UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
|
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2018
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 |
46-4845564 |
|
(State or other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
1007 Market Street, Wilmington, Delaware 19899
(Address of Principal Executive Offices)
(302) 773-1000
(Registrant’s Telephone Number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark 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 ☒ |
Accelerated Filer ☐ |
|
Non-Accelerated Filer ☐ |
Smaller reporting company ☐ |
|
|
Emerging growth company ☐ |
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 Exchange Act). Yes ☐ No ☒
The registrant had 176,845,099 shares of common stock, $0.01 par value, outstanding at July 30, 2018.
TABLE OF CONTENTS
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Page |
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Part I |
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Item 1. |
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2 |
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Interim Consolidated Statements of Comprehensive Income (Unaudited) |
3 |
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4 |
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Interim Consolidated Statements of Stockholders’ Equity (Unaudited) |
5 |
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6 |
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Notes to the Interim Consolidated Financial Statements (Unaudited) |
7 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
45 |
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Item 3. |
69 |
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Item 4. |
69 |
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Part II |
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Item 1. |
71 |
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Item 1A. |
72 |
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Item 2. |
72 |
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Item 3. |
73 |
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Item 4. |
73 |
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Item 5. |
73 |
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Item 6. |
74 |
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75 |
1
Item 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The Chemours Company
Interim Consolidated Statements of Operations (Unaudited)
(Dollars in millions, except per share amounts)
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||
|
Net sales |
|
$ |
1,816 |
|
|
$ |
1,588 |
|
|
$ |
3,546 |
|
|
$ |
3,024 |
|
|
Cost of goods sold |
|
|
1,259 |
|
|
|
1,150 |
|
|
|
2,452 |
|
|
|
2,230 |
|
|
Gross profit |
|
|
557 |
|
|
|
438 |
|
|
|
1,094 |
|
|
|
794 |
|
|
Selling, general, and administrative expense |
|
|
161 |
|
|
|
164 |
|
|
|
304 |
|
|
|
313 |
|
|
Research and development expense |
|
|
20 |
|
|
|
21 |
|
|
|
40 |
|
|
|
41 |
|
|
Restructuring, asset-related, and other charges |
|
|
10 |
|
|
|
6 |
|
|
|
20 |
|
|
|
18 |
|
|
Total other operating expenses |
|
|
191 |
|
|
|
191 |
|
|
|
364 |
|
|
|
372 |
|
|
Equity in earnings of affiliates |
|
|
10 |
|
|
|
10 |
|
|
|
22 |
|
|
|
17 |
|
|
Interest expense, net |
|
|
(48 |
) |
|
|
(54 |
) |
|
|
(100 |
) |
|
|
(105 |
) |
|
Loss on extinguishment of debt |
|
|
(38 |
) |
|
|
(1 |
) |
|
|
(38 |
) |
|
|
(1 |
) |
|
Other income, net |
|
|
33 |
|
|
|
23 |
|
|
|
90 |
|
|
|
66 |
|
|
Income before income taxes |
|
|
323 |
|
|
|
225 |
|
|
|
704 |
|
|
|
399 |
|
|
Provision for income taxes |
|
|
41 |
|
|
|
64 |
|
|
|
125 |
|
|
|
87 |
|
|
Net income |
|
|
282 |
|
|
|
161 |
|
|
|
579 |
|
|
|
312 |
|
|
Less: Net income attributable to non-controlling interests |
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
|
|
1 |
|
|
Net income attributable to Chemours |
|
$ |
281 |
|
|
$ |
161 |
|
|
$ |
578 |
|
|
$ |
311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share of common stock |
|
$ |
1.58 |
|
|
$ |
0.87 |
|
|
$ |
3.21 |
|
|
$ |
1.69 |
|
|
Diluted earnings per share of common stock |
|
|
1.53 |
|
|
|
0.84 |
|
|
|
3.11 |
|
|
|
1.64 |
|
|
Dividends per share of common stock |
|
|
0.17 |
|
|
|
0.03 |
|
|
|
0.17 |
|
|
|
0.06 |
|
See accompanying notes to the interim consolidated financial statements.
2
Interim Consolidated Statements of Comprehensive Income (Unaudited)
(Dollars in millions)
|
|
|
Three Months Ended June 30, |
|
|||||||||||||||||||||
|
|
|
2018 |
|
|
2017 |
|
||||||||||||||||||
|
|
|
Pre-tax |
|
|
Tax |
|
|
After-tax |
|
|
Pre-tax |
|
|
Tax |
|
|
After-tax |
|
||||||
|
Net income |
|
$ |
323 |
|
|
$ |
(41 |
) |
|
$ |
282 |
|
|
$ |
225 |
|
|
$ |
(64 |
) |
|
$ |
161 |
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on net investment hedge |
|
|
48 |
|
|
|
(12 |
) |
|
|
36 |
|
|
|
(40 |
) |
|
|
10 |
|
|
|
(30 |
) |
|
Unrealized gain on cash flow hedge |
|
|
7 |
|
|
|
(1 |
) |
|
|
6 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Cumulative translation adjustment |
|
|
(160 |
) |
|
|
— |
|
|
|
(160 |
) |
|
|
84 |
|
|
|
— |
|
|
|
84 |
|
|
Defined benefit plans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to accumulated other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rates |
|
|
13 |
|
|
|
— |
|
|
|
13 |
|
|
|
(15 |
) |
|
|
3 |
|
|
|
(12 |
) |
|
Reclassifications to net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service gain |
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Amortization of actuarial loss |
|
|
4 |
|
|
|
— |
|
|
|
4 |
|
|
|
5 |
|
|
|
(1 |
) |
|
|
4 |
|
|
Defined benefit plans, net |
|
|
16 |
|
|
|
— |
|
|
|
16 |
|
|
|
(10 |
) |
|
|
2 |
|
|
|
(8 |
) |
|
Other comprehensive (loss) income |
|
|
(89 |
) |
|
|
(13 |
) |
|
|
(102 |
) |
|
|
34 |
|
|
|
12 |
|
|
|
46 |
|
|
Comprehensive income |
|
|
234 |
|
|
|
(54 |
) |
|
|
180 |
|
|
|
259 |
|
|
|
(52 |
) |
|
|
207 |
|
|
Less: Comprehensive income attributable to non-controlling interests |
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Comprehensive income attributable to Chemours |
|
$ |
233 |
|
|
$ |
(54 |
) |
|
$ |
179 |
|
|
$ |
259 |
|
|
$ |
(52 |
) |
|
$ |
207 |
|
|
|
|
Six Months Ended June 30, |
|
|||||||||||||||||||||
|
|
|
2018 |
|
|
2017 |
|
||||||||||||||||||
|
|
|
Pre-tax |
|
|
Tax |
|
|
After-tax |
|
|
Pre-tax |
|
|
Tax |
|
|
After-tax |
|
||||||
|
Net income |
|
$ |
704 |
|
|
$ |
(125 |
) |
|
$ |
579 |
|
|
$ |
399 |
|
|
$ |
(87 |
) |
|
$ |
312 |
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on net investment hedge |
|
|
13 |
|
|
|
(3 |
) |
|
|
10 |
|
|
|
(50 |
) |
|
|
10 |
|
|
|
(40 |
) |
|
Unrealized gain on cash flow hedge |
|
|
7 |
|
|
|
(1 |
) |
|
|
6 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Cumulative translation adjustment |
|
|
(53 |
) |
|
|
— |
|
|
|
(53 |
) |
|
|
189 |
|
|
|
— |
|
|
|
189 |
|
|
Defined benefit plans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to accumulated other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rates |
|
|
5 |
|
|
|
— |
|
|
|
5 |
|
|
|
(27 |
) |
|
|
6 |
|
|
|
(21 |
) |
|
Reclassifications to net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service gain |
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Amortization of actuarial loss |
|
|
7 |
|
|
|
(1 |
) |
|
|
6 |
|
|
|
10 |
|
|
|
(2 |
) |
|
|
8 |
|
|
Defined benefit plans, net |
|
|
11 |
|
|
|
(1 |
) |
|
|
10 |
|
|
|
(17 |
) |
|
|
4 |
|
|
|
(13 |
) |
|
Other comprehensive (loss) income |
|
|
(22 |
) |
|
|
(5 |
) |
|
|
(27 |
) |
|
|
122 |
|
|
|
14 |
|
|
|
136 |
|
|
Comprehensive income |
|
|
682 |
|
|
|
(130 |
) |
|
|
552 |
|
|
|
521 |
|
|
|
(73 |
) |
|
|
448 |
|
|
Less: Comprehensive income attributable to non-controlling interests |
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
|
Comprehensive income attributable to Chemours |
|
$ |
681 |
|
|
$ |
(130 |
) |
|
$ |
551 |
|
|
$ |
520 |
|
|
$ |
(73 |
) |
|
$ |
447 |
|
See accompanying notes to the interim consolidated financial statements.
3
Interim Consolidated Balance Sheets
(Dollars in millions, except per share amounts)
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
June 30, 2018 |
|
|
December 31, 2017 |
|
||
|
Assets |
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,217 |
|
|
$ |
1,556 |
|
|
Accounts and notes receivable, net |
|
|
1,095 |
|
|
|
919 |
|
|
Inventories |
|
|
1,013 |
|
|
|
935 |
|
|
Prepaid expenses and other |
|
|
72 |
|
|
|
83 |
|
|
Total current assets |
|
|
3,397 |
|
|
|
3,493 |
|
|
Property, plant, and equipment |
|
|
8,718 |
|
|
|
8,511 |
|
|
Less: Accumulated depreciation |
|
|
(5,613 |
) |
|
|
(5,503 |
) |
|
Property, plant, and equipment, net |
|
|
3,105 |
|
|
|
3,008 |
|
|
Goodwill and other intangible assets, net |
|
|
189 |
|
|
|
166 |
|
|
Investments in affiliates |
|
|
172 |
|
|
|
173 |
|
|
Other assets |
|
|
475 |
|
|
|
453 |
|
|
Total assets |
|
$ |
7,338 |
|
|
$ |
7,293 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
1,175 |
|
|
$ |
1,075 |
|
|
Current maturities of long-term debt |
|
|
13 |
|
|
|
15 |
|
|
Other accrued liabilities |
|
|
434 |
|
|
|
558 |
|
|
Total current liabilities |
|
|
1,622 |
|
|
|
1,648 |
|
|
Long-term debt, net |
|
|
3,960 |
|
|
|
4,097 |
|
|
Deferred income taxes |
|
|
255 |
|
|
|
208 |
|
|
Other liabilities |
|
|
476 |
|
|
|
475 |
|
|
Total liabilities |
|
|
6,313 |
|
|
|
6,428 |
|
|
Commitments and contingent liabilities |
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
Common stock (par value $0.01 per share; 810,000,000 shares authorized; 186,594,368 shares issued and 176,521,132 shares outstanding at June 30, 2018; 185,343,034 shares issued and 182,956,628 shares outstanding at December 31, 2017) |
|
|
2 |
|
|
|
2 |
|
|
Treasury stock at cost (10,073,236 shares at June 30, 2018; 2,386,406 shares at December 31, 2017) |
|
|
(500 |
) |
|
|
(116 |
) |
|
Additional paid-in capital |
|
|
859 |
|
|
|
837 |
|
|
Retained earnings |
|
|
1,127 |
|
|
|
579 |
|
|
Accumulated other comprehensive loss |
|
|
(469 |
) |
|
|
(442 |
) |
|
Total Chemours stockholders’ equity |
|
|
1,019 |
|
|
|
860 |
|
|
Non-controlling interests |
|
|
6 |
|
|
|
5 |
|
|
Total equity |
|
|
1,025 |
|
|
|
865 |
|
|
Total liabilities and equity |
|
$ |
7,338 |
|
|
$ |
7,293 |
|
See accompanying notes to the interim consolidated financial statements.
4
Interim Consolidated Statements of Stockholders’ Equity (Unaudited)
(Dollars in millions)
|
|
|
Common Stock |
|
|
Treasury Stock |
|
|
Additional Paid-In |
|
|
(Accumulated Deficit) Retained |
|
|
Accumulated Other Comprehensive |
|
|
Non-controlling |
|
|
|
|
|
||||||||||||||
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Earnings |
|
|
(Loss) Income |
|
|
Interests |
|
|
Total Equity |
|
|||||||||
|
Balance at January 1, 2017 |
|
|
182,600,533 |
|
|
$ |
2 |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
789 |
|
|
$ |
(114 |
) |
|
$ |
(577 |
) |
|
$ |
4 |
|
|
$ |
104 |
|
|
Common stock issued - compensation plans |
|
|
461,754 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Exercise of stock options, net |
|
|
1,628,850 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
26 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
26 |
|
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15 |
|
|
Cancellation of unissued stock awards withheld to cover taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(10 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(10 |
) |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
311 |
|
|
|
— |
|
|
|
1 |
|
|
|
312 |
|
|
Dividends paid |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(11 |
) |
|
|
— |
|
|
|
— |
|
|
|
(11 |
) |
|
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
136 |
|
|
|
— |
|
|
|
136 |
|
|
Balance at June 30, 2017 |
|
|
184,691,137 |
|
|
$ |
2 |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
820 |
|
|
$ |
186 |
|
|
$ |
(441 |
) |
|
$ |
5 |
|
|
$ |
572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2018 |
|
|
185,343,034 |
|
|
$ |
2 |
|
|
|
2,386,406 |
|
|
$ |
(116 |
) |
|
$ |
837 |
|
|
$ |
579 |
|
|
$ |
(442 |
) |
|
$ |
5 |
|
|
$ |
865 |
|
|
Common stock issued - compensation plans |
|
|
355,707 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Exercise of stock options, net |
|
|
895,627 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
13 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
13 |
|
|
Purchases of treasury stock, at cost |
|
|
— |
|
|
|
— |
|
|
|
7,699,241 |
|
|
|
(384 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(384 |
) |
|
Shares issued under employee stock purchase plan |
|
|
— |
|
|
|
— |
|
|
|
(12,411 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15 |
|
|
Cancellation of unissued stock awards withheld to cover taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6 |
) |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
578 |
|
|
|
— |
|
|
|
1 |
|
|
|
579 |
|
|
Dividends paid |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(30 |
) |
|
|
— |
|
|
|
— |
|
|
|
(30 |
) |
|
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(27 |
) |
|
|
— |
|
|
|
(27 |
) |
|
Balance at June 30, 2018 |
|
|
186,594,368 |
|
|
$ |
2 |
|
|
|
10,073,236 |
|
|
$ |
(500 |
) |
|
$ |
859 |
|
|
$ |
1,127 |
|
|
$ |
(469 |
) |
|
$ |
6 |
|
|
$ |
1,025 |
|
See accompanying notes to the interim consolidated financial statements.
5
Interim Consolidated Statements of Cash Flows (Unaudited)
(Dollars in millions)
|
|
|
Six Months Ended June 30, |
|
|||||
|
|
|
2018 |
|
|
2017 |
|
||
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
579 |
|
|
$ |
312 |
|
|
Adjustments to reconcile net income to cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
142 |
|
|
|
142 |
|
|
Asset-related charges |
|
|
— |
|
|
|
2 |
|
|
Gain on sale of assets and businesses |
|
|
(45 |
) |
|
|
(14 |
) |
|
Equity in earnings of affiliates, net |
|
|
6 |
|
|
|
(17 |
) |
|
Loss on extinguishment of debt |
|
|
38 |
|
|
|
1 |
|
|
Amortization of debt issuance costs and issue discounts |
|
|
7 |
|
|
|
7 |
|
|
Deferred tax provision |
|
|
38 |
|
|
|
38 |
|
|
Other operating charges and credits, net |
|
|
10 |
|||||