Edgar Filing: Chemours Co

cc-10q_20190331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

☐	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 ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Trading Symbol(s)		Name of Exchange on Which Registered
Common Stock ($.01 par value)		CC		New York Stock Exchange

The registrant had 163,963,626 shares of common stock, $0.01 par value, outstanding at April 29, 2019.

The Chemours Company

TABLE OF CONTENTS

		Page
Part I	Financial Information
Item 1.	Interim Consolidated Financial Statements
	Interim Consolidated Statements of Operations (Unaudited)	2
	Interim Consolidated Statements of Comprehensive Income (Unaudited)	3
	Interim Consolidated Balance Sheets	4
	Interim Consolidated Statements of Stockholders’ Equity (Unaudited)	5
	Interim Consolidated Statements of Cash Flows (Unaudited)	6
	Notes to the Interim Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55
Item 4.	Controls and Procedures	56

Part II	Other Information
Item 1.	Legal Proceedings	57
Item 1A.	Risk Factors	58
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	59
Item 4.	Mine Safety Disclosures	59
Item 5.	Other Information	59
Item 6.	Exhibits	59
Signature		60

PART I. FINANCIAL INFORMATION

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 March 31,
	2019			2018
Net sales	$	1,376		$	1,730
Cost of goods sold		1,080			1,193
Gross profit		296			537
Selling, general, and administrative expense		156			143
Research and development expense		22			20
Restructuring, asset-related, and other charges		8			10
Total other operating expenses		186			173
Equity in earnings of affiliates		8			12
Interest expense, net		(51	)		(52	)
Other income, net		40			57
Income before income taxes		107			381
Provision for income taxes		13			84
Net income		94			297
Net income attributable to Chemours	$	94		$	297
Per share data
Basic earnings per share of common stock	$	0.56		$	1.63
Diluted earnings per share of common stock		0.55			1.58

See accompanying notes to the interim consolidated financial statements.

The Chemours Company

Interim Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in millions)

	Three Months Ended March 31,
	2019									2018
	Pre-tax			Tax			After-tax			Pre-tax			Tax			After-tax
Net income	$	107		$	(13	)	$	94		$	381		$	(84	)	$	297
Other comprehensive income (loss):
Hedging activities:
Unrealized gain (loss) on net investment hedge		10			(3	)		7			(34	)		8			(26	)
Unrealized gain on cash flow hedge		2			—			2			—			—			—
Reclassifications to net income - cash flow hedge		(3	)		—			(3	)		—			—			—
Hedging activities, net		9			(3	)		6			(34	)		8			(26	)
Cumulative translation adjustment		7			—			7			108			—			108
Defined benefit plans:
Additions to accumulated other comprehensive loss:
Effect of foreign exchange rates		3			—			3			(9	)		—			(9	)
Reclassifications to net income:
Amortization of actuarial loss		5			(1	)		4			4			(1	)		3
Settlement loss		1			—			1			—			—			—
Defined benefit plans, net		9			(1	)		8			(5	)		(1	)		(6	)
Other comprehensive income		25			(4	)		21			69			7			76
Comprehensive income		132			(17	)		115			450			(77	)		373
Comprehensive income attributable to Chemours	$	132		$	(17	)	$	115		$	450		$	(77	)	$	373

See accompanying notes to the interim consolidated financial statements.

The Chemours Company

Interim Consolidated Balance Sheets

(Dollars in millions, except per share amounts)

	(Unaudited)
	March 31, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	697		$	1,201
Accounts and notes receivable, net		847			861
Inventories		1,218			1,147
Prepaid expenses and other		85			84
Total current assets		2,847			3,293
Property, plant, and equipment		9,089			8,992
Less: Accumulated depreciation		(5,710	)		(5,701	)
Property, plant, and equipment, net		3,379			3,291
Operating lease right-of-use assets		323			—
Goodwill and other intangible assets, net		180			181
Investments in affiliates		166			160
Other assets		430			437
Total assets	$	7,325		$	7,362
Liabilities
Current liabilities:
Accounts payable	$	1,042		$	1,137
Current maturities of long-term debt		13			13
Other accrued liabilities		517			559
Total current liabilities		1,572			1,709
Long-term debt, net		3,965			3,959
Operating lease liabilities		265			—
Deferred income taxes		212			217
Other liabilities		495			457
Total liabilities		6,509			6,342
Commitments and contingent liabilities
Equity
Common stock (par value $0.01 per share; 810,000,000 shares authorized; 188,693,084 shares issued and 164,990,989 shares outstanding at March 31, 2019; 187,204,567 shares issued and 170,780,474 shares outstanding at December 31, 2018)		2			2
Treasury stock, at cost (23,702,095 shares at March 31, 2019; 16,424,093 shares at December 31, 2018)		(1,011	)		(750	)
Additional paid-in capital		845			860
Retained earnings		1,517			1,466
Accumulated other comprehensive loss		(543	)		(564	)
Total Chemours stockholders’ equity		810			1,014
Non-controlling interests		6			6
Total equity		816			1,020
Total liabilities and equity	$	7,325		$	7,362

See accompanying notes to the interim consolidated financial statements.

The Chemours Company

Interim Consolidated Statements of Stockholders’ Equity (Unaudited)

(Dollars in millions)

	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 January 1, 2018		185,343,034	$	2	$	—		2,386,406	$	(116	)	$	837		$	579		$	(442	)	$	5	$	865
Common stock issued - compensation plans		286,618		—		—		—		—			—			—			—			—		—
Exercise of stock options, net		273,460		—		—		—		—			5			—			—			—		5
Purchases of treasury stock, at cost		—		—		—		4,979,152		(245	)		—			—			—			—		(245	)
Stock-based compensation expense		—		—		—		—		—			9			—			—			—		9
Cancellation of unissued stock awards withheld to cover taxes		—		—		—		—		—			(5	)		—			—			—		(5	)
Net income		—		—		—		—		—			—			297			—			—		297
Other comprehensive income		—		—		—		—		—			—			—			76			—		76
Balance at March 31, 2018		185,903,112	$	2	$	—		7,365,558	$	(361	)	$	846		$	876		$	(366	)	$	5	$	1,002

Balance at January 1, 2019		187,204,567	$	2	$	—		16,424,093	$	(750	)	$	860		$	1,466		$	(564	)	$	6	$	1,020
Common stock issued - compensation plans		1,078,034		—		—		—		—			1			(1	)		—			—		—
Exercise of stock options, net		410,483		—		—		—		—			6			—			—			—		6
Purchases of treasury stock, at cost		—		—		—		7,278,002		(261	)		—			—			—			—		(261	)
Stock-based compensation expense		—		—		—		—		—			8			—			—			—		8
Cancellation of unissued stock awards withheld to cover taxes		—		—		—		—		—			(30	)		—			—			—		(30	)
Net income		—