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 September 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 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 ☐
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 171,084,799 shares of common stock, $0.01 par value, outstanding at October 29, 2018.
TABLE OF CONTENTS
|
|
|
Page |
|
Part I |
|
|
|
Item 1. |
|
|
|
|
2 |
|
|
|
Interim Consolidated Statements of Comprehensive Income (Unaudited) |
3 |
|
|
4 |
|
|
|
Interim Consolidated Statements of Stockholders’ Equity (Unaudited) |
5 |
|
|
6 |
|
|
|
Notes to the Interim Consolidated Financial Statements (Unaudited) |
7 |
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
46 |
|
Item 3. |
70 |
|
|
Item 4. |
70 |
|
|
|
|
|
|
Part II |
|
|
|
Item 1. |
72 |
|
|
Item 1A. |
73 |
|
|
Item 2. |
73 |
|
|
Item 3. |
74 |
|
|
Item 4. |
74 |
|
|
Item 5. |
74 |
|
|
Item 6. |
74 |
|
|
|
|
|
|
|
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 September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||
|
Net sales |
|
$ |
1,628 |
|
|
$ |
1,584 |
|
|
$ |
5,174 |
|
|
$ |
4,608 |
|
|
Cost of goods sold |
|
|
1,151 |
|
|
|
1,119 |
|
|
|
3,603 |
|
|
|
3,347 |
|
|
Gross profit |
|
|
477 |
|
|
|
465 |
|
|
|
1,571 |
|
|
|
1,261 |
|
|
Selling, general, and administrative expense |
|
|
163 |
|
|
|
153 |
|
|
|
466 |
|
|
|
461 |
|
|
Research and development expense |
|
|
20 |
|
|
|
20 |
|
|
|
61 |
|
|
|
62 |
|
|
Restructuring, asset-related, and other charges |
|
|
12 |
|
|
|
8 |
|
|
|
32 |
|
|
|
31 |
|
|
Total other operating expenses |
|
|
195 |
|
|
|
181 |
|
|
|
559 |
|
|
|
554 |
|
|
Equity in earnings of affiliates |
|
|
10 |
|
|
|
9 |
|
|
|
32 |
|
|
|
26 |
|
|
Interest expense, net |
|
|
(47 |
) |
|
|
(55 |
) |
|
|
(148 |
) |
|
|
(160 |
) |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
(38 |
) |
|
|
(1 |
) |
|
Other income, net |
|
|
24 |
|
|
|
12 |
|
|
|
115 |
|
|
|
77 |
|
|
Income before income taxes |
|
|
269 |
|
|
|
250 |
|
|
|
973 |
|
|
|
649 |
|
|
(Benefit from) provision for income taxes |
|
|
(6 |
) |
|
|
43 |
|
|
|
119 |
|
|
|
130 |
|
|
Net income |
|
|
275 |
|
|
|
207 |
|
|
|
854 |
|
|
|
519 |
|
|
Less: Net income attributable to non-controlling interests |
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
1 |
|
|
Net income attributable to Chemours |
|
$ |
275 |
|
|
$ |
207 |
|
|
$ |
853 |
|
|
$ |
518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share of common stock |
|
$ |
1.56 |
|
|
$ |
1.12 |
|
|
$ |
4.77 |
|
|
$ |
2.81 |
|
|
Diluted earnings per share of common stock |
|
|
1.51 |
|
|
|
1.08 |
|
|
|
4.62 |
|
|
|
2.72 |
|
See accompanying notes to the interim consolidated financial statements.
2
Interim Consolidated Statements of Comprehensive Income (Unaudited)
(Dollars in millions)
|
|
|
Three Months Ended September 30, |
|
|||||||||||||||||||||
|
|
|
2018 |
|
|
2017 |
|
||||||||||||||||||
|
|
|
Pre-tax |
|
|
Tax |
|
|
After-tax |
|
|
Pre-tax |
|
|
Tax |
|
|
After-tax |
|
||||||
|
Net income |
|
$ |
269 |
|
|
$ |
6 |
|
|
$ |
275 |
|
|
$ |
250 |
|
|
$ |
(43 |
) |
|
$ |
207 |
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on net investment hedge |
|
|
(11 |
) |
|
|
3 |
|
|
|
(8 |
) |
|
|
(26 |
) |
|
|
10 |
|
|
|
(16 |
) |
|
Unrealized loss on cash flow hedge |
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Reclassifications to net income - cash flow hedge |
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Hedging activities, net |
|
|
(13 |
) |
|
|
3 |
|
|
|
(10 |
) |
|
|
(26 |
) |
|
|
10 |
|
|
|
(16 |
) |
|
Cumulative translation adjustment |
|
|
36 |
|
|
|
— |
|
|
|
36 |
|
|
|
35 |
|
|
|
— |
|
|
|
35 |
|
|
Defined benefit plans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to accumulated other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
5 |
|
|
|
— |
|
|
|
5 |
|
|
|
Effect of foreign exchange rates |
|
|
(2 |
) |
|
|
— |
|
|
|
(2 |
) |
|
|
(9 |
) |
|
|
2 |
|
|
|
(7 |
) |
|
Reclassifications to net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service gain |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
|
Amortization of actuarial loss |
|
|
4 |
|
|
|
(1 |
) |
|
|
3 |
|
|
|
5 |
|
|
|
(1 |
) |
|
|
4 |
|
|
Settlement loss |
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
|
Defined benefit plans, net |
|
|
4 |
|
|
|
(1 |
) |
|
|
3 |
|
|
|
1 |
|
|
|
1 |
|
|
|
2 |
|
|
Other comprehensive income |
|
|
27 |
|
|
|
2 |
|
|
|
29 |
|
|
|
10 |
|
|
|
11 |
|
|
|
21 |
|
|
Comprehensive income |
|
|
296 |
|
|
|
8 |
|
|
|
304 |
|
|
|
260 |
|
|
|
(32 |
) |
|
|
228 |
|
|
Less: Comprehensive income attributable to non-controlling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Comprehensive income attributable to Chemours |
|
$ |
296 |
|
|
$ |
8 |
|
|
$ |
304 |
|
|
$ |
260 |
|
|
$ |
(32 |
) |
|
$ |
228 |
|
|
|
|
Nine Months Ended September 30, |
|
|||||||||||||||||||||
|
|
|
2018 |
|
|
2017 |
|
||||||||||||||||||
|
|
|
Pre-tax |
|
|
Tax |
|
|
After-tax |
|
|
Pre-tax |
|
|
Tax |
|
|
After-tax |
|
||||||
|
Net income |
|
$ |
973 |
|
|
$ |
(119 |
) |
|
$ |
854 |
|
|
$ |
649 |
|
|
$ |
(130 |
) |
|
$ |
519 |
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on net investment hedge |
|
|
2 |
|
|
|
(1 |
) |
|
|
1 |
|
|
|
(76 |
) |
|
|
20 |
|
|
|
(56 |
) |
|
Unrealized gain on cash flow hedge |
|
|
6 |
|
|
|
— |
|
|
|
6 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Reclassifications to net income - cash flow hedge |
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Hedging activities, net |
|
|
7 |
|
|
|
(1 |
) |
|
|
6 |
|
|
|
(76 |
) |
|
|
20 |
|
|
|
(56 |
) |
|
Cumulative translation adjustment |
|
|
(17 |
) |
|
|
— |
|
|
|
(17 |
) |
|
|
224 |
|
|
|
— |
|
|
|
224 |
|
|
Defined benefit plans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to accumulated other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
5 |
|
|
|
— |
|
|
|
5 |
|
|
|
Effect of foreign exchange rates |
|
|
3 |
|
|
|
— |
|
|
|
3 |
|
|
|
(36 |
) |
|
|
8 |
|
|
|
(28 |
) |
|
Reclassifications to net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service gain |
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
|
Amortization of actuarial loss |
|
|
11 |
|
|
|
(2 |
) |
|
|
9 |
|
|
|
15 |
|
|
|
(3 |
) |
|
|
12 |
|
|
Settlement loss |
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
|
Defined benefit plans, net |
|
|
15 |
|
|
|
(2 |
) |
|
|
13 |
|
|
|
(16 |
) |
|
|
5 |
|
|
|
(11 |
) |
|
Other comprehensive income |
|
|
5 |
|
|
|
(3 |
) |
|
|
2 |
|
|
|
132 |
|
|
|
25 |
|
|
|
157 |
|
|
Comprehensive income |
|
|
978 |
|
|
|
(122 |
) |
|
|
856 |
|
|
|
781 |
|
|
|
(105 |
) |
|
|
676 |
|
|
Less: Comprehensive income attributable to non-controlling interests |
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
|
Comprehensive income attributable to Chemours |
|
$ |
977 |
|
|
$ |
(122 |
) |
|
$ |
855 |
|
|
$ |
780 |
|
|
$ |
(105 |
) |
|
$ |
675 |
|
See accompanying notes to the interim consolidated financial statements.
3
Interim Consolidated Balance Sheets
(Dollars in millions, except per share amounts)
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
September 30, 2018 |
|
|
December 31, 2017 |
|
||
|
Assets |
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,275 |
|
|
$ |
1,556 |
|
|
Accounts and notes receivable, net |
|
|
998 |
|
|
|
919 |
|
|
Inventories |
|
|
1,086 |
|
|
|
935 |
|
|
Prepaid expenses and other |
|
|
89 |
|
|
|
83 |
|
|
Total current assets |
|
|
3,448 |
|
|
|
3,493 |
|
|
Property, plant, and equipment |
|
|
8,885 |
|
|
|
8,511 |
|
|
Less: Accumulated depreciation |
|
|
(5,678 |
) |
|
|
(5,503 |
) |
|
Property, plant, and equipment, net |
|
|
3,207 |
|
|
|
3,008 |
|
|
Goodwill and other intangible assets, net |
|
|
187 |
|
|
|
166 |
|
|
Investments in affiliates |
|
|
179 |
|
|
|
173 |
|
|
Other assets |
|
|
491 |
|
|
|
453 |
|
|
Total assets |
|
$ |
7,512 |
|
|
$ |
7,293 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
1,123 |
|
|
$ |
1,075 |
|
|
Current maturities of long-term debt |
|
|
14 |
|
|
|
15 |
|
|
Other accrued liabilities |
|
|
561 |
|
|
|
558 |
|
|
Total current liabilities |
|
|
1,698 |
|
|
|
1,648 |
|
|
Long-term debt, net |
|
|
3,985 |
|
|
|
4,097 |
|
|
Deferred income taxes |
|
|
220 |
|
|
|
208 |
|
|
Other liabilities |
|
|
463 |
|
|
|
475 |
|
|
Total liabilities |
|
|
6,366 |
|
|
|
6,428 |
|
|
Commitments and contingent liabilities |
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
Common stock (par value $0.01 per share; 810,000,000 shares authorized; 187,149,447 shares issued and 173,849,387 shares outstanding at September 30, 2018; 185,343,034 shares issued and 182,956,628 shares outstanding at December 31, 2017) |
|
|
2 |
|
|
|
2 |
|
|
Treasury stock at cost (13,300,060 shares at September 30, 2018; 2,386,406 shares at December 31, 2017) |
|
|
(636 |
) |
|
|
(116 |
) |
|
Additional paid-in capital |
|
|
856 |
|
|
|
837 |
|
|
Retained earnings |
|
|
1,358 |
|
|
|
579 |
|
|
Accumulated other comprehensive loss |
|
|
(440 |
) |
|
|
(442 |
) |
|
Total Chemours stockholders’ equity |
|
|
1,140 |
|
|
|
860 |
|
|
Non-controlling interests |
|
|
6 |
|
|
|
5 |
|
|
Total equity |
|
|
1,146 |
|
|
|
865 |
|
|
Total liabilities and equity |
|
$ |
7,512 |
|
|
$ |
7,293 |
|
See accompanying notes to the interim consolidated financial statements.
4
Interim Consolidated Statements of Stockholders’ Equity (Unaudited)
(Dollars in millions, except per share amounts)
|
|
|
Three Months Ended September 30, |
|
|||||||||||||||||||||||||||||||||||||
|
|
|
Common Stock |
|
|
Treasury Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
Shares |
|
|
Amount |
|
|
Dividends per Share |
|
|
Shares |
|
|
Amount |
|
|
Additional Paid-in Capital |
|
|
Retained Earnings |
|
|
Accumulated Other Comprehensive (Loss) Income |
|
|
Non-controlling Interests |
|
|
Total Equity |
|
||||||||||
|
Balance at July 1, 2017 |
|
|
184,691,137 |
|
|
$ |
2 |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
820 |
|
|
$ |
186 |
|
|
$ |
(441 |
) |
|
$ |
5 |
|
|
$ |
572 |
|
|
Common stock issued - compensation plans |
|
|
42,344 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Exercise of stock options, net |
|
|
358,577 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4 |
|
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6 |
|
|
Cancellation of unissued stock awards withheld to cover taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
207 |
|
|
|
— |
|
|
|
— |
|
|
|
207 |
|
|
Dividends |
|
|
— |
|
|
|
— |
|
|
|
0.03 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5 |
) |
|
|
— |
|
|
|
— |
|
|
|
(5 |
) |
|
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
21 |
|
|
|
— |
|
|
|
21 |
|
|
Balance at September 30, 2017 |
|
|
185,092,058 |
|
|
$ |
2 |
|
|
$ |
0.03 |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
830 |
|
|
$ |
388 |
|
|
$ |
(420 |
) |
|
$ |
5 |
|
|
$ |
805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 1, 2018 |
|
|
186,594,368 |
|
|
$ |
2 |
|
|
$ |
— |
|
|
|
10,073,236 |
|
|
$ |
(500 |
) |
|
$ |
859 |
|
|
$ |
1,127 |
|
|
$ |
(469 |
) |
|
$ |
6 |
|
|
$ |
1,025 |
|
|
Common stock issued - compensation plans |
|
|
431,744 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Exercise of stock options, net |
|
|
123,335 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
Purchases of treasury stock, at cost |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,226,824 |
|
|
|
(136 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(136 |
) |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
|
Cancellation of unissued stock awards withheld to cover taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(10 |
|||||||||||||||||