Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2016
 
OR
o
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
 
(I.R.S. Employer
Incorporation or Organization)
 
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  x No  o
 
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 registrant was required to submit and post such files.)  Yes  x   No  o
 
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):
Large Accelerated Filer o
 
Accelerated Filer o
 
 
 
Non-Accelerated Filer x
 
Smaller reporting company o
 
Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).  Yes  o   No  x

The Registrant had 181,545,136 shares of common stock, $0.01 par value, outstanding at August 3, 2016.
 
 


The Chemours Company

Table of Contents
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
7 
 
 
 
 
 
 

1
Table of Contents
    

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
 
Six months ended

June 30,
 
June 30,
 
2016

2015
 
2016
 
2015
Net sales
$
1,383


$
1,508

 
$
2,680

 
$
2,871

Cost of goods sold
1,116


1,282

 
2,212

 
2,393

Gross profit
267


226

 
468

 
478

Selling, general and administrative expense
174


157

 
307

 
324

Research and development expense
17


27

 
40

 
50

Employee separation and asset related charges, net
67


61

 
85

 
61

Total expenses
258


245

 
432

 
435

Equity in earnings of affiliates
4


8

 
9

 
11

Interest expense, net
(50
)

(28
)
 
(106
)
 
(28
)
Other (expense) income, net
(4
)

21

 
89

 
14

(Loss) income before income taxes
(41
)

(18
)
 
28

 
40

(Benefit from) provision for income taxes
(23
)

—

 
(5
)
 
15

Net (loss) income
(18
)

(18
)
 
33

 
25

Less: Net income attributable to noncontrolling interests
—


—

 
—

 
—

Net (loss) income attributable to Chemours
$
(18
)

$
(18
)
 
$
33

 
$
25







 
 
 
 
Per share data





 
 
 
 
Basic (loss) earnings per share of common stock 1
$
(0.10
)

$
(0.10
)
 
$
0.18

 
$
0.14

Diluted (loss) earnings per share of common stock 1
$
(0.10
)

$
(0.10
)
 
$
0.18

 
$
0.14

Dividends per share of common stock 1
$
0.03


$
0.55

 
$
0.06

 
$
0.55

 
 1 On July 1, 2015, E. I. du Pont de Nemours and Company distributed 180,966,833 shares of Chemours' common stock to holders of its common stock. Basic and diluted earnings per common share and dividends per common share for the three and six months ended June 30, 2015 were calculated using the number of shares distributed on July 1, 2015. Refer to Note 9 for information regarding the calculation of basic and diluted earnings per share.

See accompanying notes to the interim consolidated financial statements.

2
Table of Contents
    

The Chemours Company
Interim Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(Dollars in millions)
 
 
Three months ended June 30,
 
2016
 
2015
 
Pre-Tax
 
Tax
 
After-Tax
 
Pre-Tax
 
Tax
 
After-Tax
Net loss
$
(41
)
 
$
23

 
$
(18
)
 
$
(18
)
 
$
—

 
$
(18
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
Unrealized gain on net investment hedge
4

 
—

 
4

 
—

 
—

 
—

Cumulative translation adjustments
(9
)
 
—

 
(9
)
 
(28
)
 
—

 
(28
)
Pension benefit plans, net:
 
 
 
 
 
 
 
 
 
 
 
Net loss
(7
)
 
1

 
(6
)
 
—

 
—

 
—

Effect of foreign exchange rates
4

 
—

 
4

 
(9
)
 
2

 
(7
)
Reclassifications to net income (loss): 1
 
 
 
 
 
 
 
 
 
 
 
Amortization of prior service cost
—

 
—

 
—

 
1

 
—

 
1

Amortization of actuarial net loss
7

 
(2
)
 
5

 
3

 
—

 
3

Curtailment gain
(2
)
 
—

 
(2
)
 
—

 
—

 
—

Pension benefit plans, net
2

 
(1
)
 
1

 
(5
)
 
2

 
(3
)
Other comprehensive loss
(3
)
 
(1
)
 
(4
)
 
(33
)
 
2

 
(31
)
Comprehensive loss
(44
)
 
22

 
(22
)
 
(51
)
 
2

 
(49
)
Less: Comprehensive income (loss) attributable to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

Comprehensive loss attributable to Chemours
$
(44
)
 
$
22

 
$
(22
)
 
$
(51
)
 
$
2

 
$
(49
)
 
Six months ended June 30,
 
2016
 
2015
 
Pre-Tax
 
Tax
 
After-Tax
 
Pre-Tax
 
Tax
 
After-Tax
Net income
$
28

 
$
5

 
$
33

 
$
40

 
$
(15
)
 
$
25

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
Unrealized loss on net investment hedge
(3
)
 
—

 
(3
)
 
—

 
—

 
—

Cumulative translation adjustments
10

 
—

 
10

 
(234
)
 
—

 
(234
)
Pension benefit plans, net:
 
 
 
 
 
 
 
 
 
 
 
Net (loss) gain
(7
)
 
1

 
(6
)
 
3

 
(1
)
 
2

Effect of foreign exchange rates
(1
)
 
1

 
—

 
23

 
(6
)
 
17

Reclassifications to net income (loss): 1
 
 
 
 
 
 
 
 
 
 
 
Amortization of prior service cost
(1
)
 
—

 
(1
)
 
2

 
—

 
2

Amortization of actuarial net loss
11

 
(3
)
 
8

 
7

 
(1
)
 
6

Curtailment gain
(2
)
 
1

 
(1
)
 
—

 
—

 
—

Pension benefit plans, net
—

 
—

 
—

 
35

 
(8
)
 
27

Other comprehensive income (loss)
7

 
—

 
7

 
(199
)
 
(8
)
 
(207
)
Comprehensive income (loss)
35

 
5

 
40

 
(159
)
 
(23
)
 
(182
)
Less: Comprehensive income (loss) attributable to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

Comprehensive income (loss) attributable to Chemours
$
35

 
$
5

 
$
40

 
$
(159
)
 
$
(23
)
 
$
(182
)
 
1 These other comprehensive income (loss) components are included in the computation of net periodic benefit costs (refer to Note 18 for further information).

See accompanying notes to the interim consolidated financial statements.

3
Table of Contents
    

The Chemours Company
Interim Consolidated Balance Sheets
(Dollars in millions, except per share amount) 
 
June 30,
2016
 
December 31,
2015
 
(Unaudited)
 
 
Assets
 

 
 

Current assets:
 
 
 
Cash
$
383

 
$
366

Accounts and notes receivable - trade, net
939

 
859

Inventories
892

 
972

Prepaid expenses and other
52

 
58

Assets held-for-sale
26

 
46

Total current assets
2,292

 
2,301

Property, plant and equipment
8,334

 
9,015

Less: Accumulated depreciation
(5,444
)
 
(5,838
)
Net property, plant and equipment
2,890

 
3,177

Goodwill
153

 
166

Other intangible assets, net
8

 
10

Investments in affiliates
157

 
136

Assets held-for-sale
352

 
—

Other assets
369

 
508

Total assets
$
6,221

 
$
6,298

Liabilities and equity
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
875

 
$
973

Short-term borrowings and current maturities of long-term debt
36

 
39

Other accrued liabilities
533

 
454

Total current liabilities
1,444

 
1,466

Long-term debt, net
3,823

 
3,915

Deferred income taxes
202

 
234

Other liabilities
583

 
553

Total liabilities
6,052

 
6,168

Commitments and contingent liabilities


 


Equity
 

 
 

Common stock (par value $.01 per share; 810,000,000 shares authorized; 181,491,426 shares issued and outstanding as of June 30, 2016)
2

 
2

Additional paid-in capital
774

 
775

Accumulated deficit
(82
)
 
(115
)
Accumulated other comprehensive loss
(529
)
 
(536
)
Total Chemours stockholders' equity
165

 
126

Noncontrolling interests
4

 
4

Total equity
169

 
130

Total liabilities and equity
$
6,221

 
$
6,298


See accompanying notes to the interim consolidated financial statements.

4
Table of Contents
    

The Chemours Company
Interim Consolidated Statements of Stockholders' Equity (Unaudited)
Six Months Ended June 30, 2016 and 2015
(Dollars in millions)
 
 
 
 
DuPont Company Net Investment
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Accumulated Deficit
 
Noncontrolling Interests
 
Total
 
 
Common Stock
 
 
 
 
 
 
 
 
Shares
 
Amount
 
 
 
 
 
 
Balance at
January 1, 2015
 
—

 
—

 
$
3,650

 
$
—

 
$
19

 
$
—

 
$
4

 
$
3,673

Net income
 
—

 
—

 
25

 
—

 
—

 
—

 
—

 
25

Establishment of pension plans, net and related accumulated other comprehensive income (loss)
 
—

 
—

 
357

 
—

 
(247
)
 
—

 
—

 
110

Other comprehensive loss
 
—

 
—

 
—

 
—

 
(207
)
 
—

 
—

 
(207
)
Dividend Declared
 
—

 
—

 
(100
)
 
—

 
—

 
—

 
—

 
(100
)
Non-cash debt exchange
 
—

 
—

 
(507
)
 
—

 
—

 
—

 
—

 
(507
)
Cash provided at separation by DuPont
 
—

 
—

 
247

 
—

 
—

 
—

 
—

 
247

Net transfers to DuPont
 
—

 
—

 
(2,836
)
 
—

 
—

 
—

 
—

 
(2,836
)
Balance at
June 30, 2015
 
—

 
$
—

 
$
836

 
$
—

 
$
(435
)
 
$
—

 
$
4

 
$
405

 
 
 
 
 
 
 
 
 
 
 
 


 
 
 
 
Balance at
January 1, 2016
 
181,069,751

 
$
2

 
$
—

 
$
775

 
$
(536
)
 
$
(115
)
 
$
4

 
$
130

Net income
 
—

 
—

 
—

 
—

 
—

 
33

 
—

 
33

Common stock issued - compensation plan
 
421,675

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Dividends
 
—

 
—

 
—

 
(11
)
 
—

 
—

 
—

 
(11
)
Other comprehensive income
 
—

 
—

 
—

 
—

 
7

 
—

 
—

 
7

Stock based compensation
 
—

 
—

 
—

 
10

 
—

 
—

 
—

 
10

Balance at June 30, 2016
 
181,491,426

 
$
2

 
$
—

 
$
774

 
$
(529
)
 
$
(82
)
 
$
4

 
$
169


See accompanying notes to the interim consolidated financial statements.


5
Table of Contents
    

The Chemours Company
Interim Consolidated Statements of Cash Flows (Unaudited)
(Dollars in millions)
 
Six months ended
 
June 30,
 
2016
 
2015
Operating activities
 
 
 
Net income
$
33

 
$
25

Adjustments to reconcile net income to cash provided by (used for) operating activities:
 

 
 

Depreciation and amortization
139

 
131

Amortization of debt issuance costs and discount
11

 
2

Gain on sale of assets and business
(88
)
 
—

Equity in earnings of affiliates
(9
)
 
(11
)
Deferred tax benefits
(36
)
 
(31
)
Asset related charges
63

 
—

Other operating charges, net
14

 
2

Decrease (increase) in operating assets:
 
 
 
     Accounts and notes receivable - trade, net
(92
)
 
(205
)
     Inventories and other operating assets
85

 
(68
)
Increase (decrease) in operating liabilities:
 
 
 
     Accounts payable and other operating liabilities
6

 
(78
)
Cash provided by (used for) operating activities
126

 
(233
)
Investing activities
 

 
 

Purchases of property, plant and equipment
(168
)
 
(287
)
Proceeds from sales of assets and business
150

 
8

Foreign exchange contract settlements
—

 
(12
)
Investment in affiliates
—

 
(32
)
Cash used for investing activities
(18
)
 
(323
)
Financing activities
 

 
 

Proceeds from issuance of debt, net
—

 
3,490

Debt repayments
(95
)
 
—

Deferred financing fees
(2
)
 
(77
)
Dividends paid
(11
)
 
—

Cash provided at separation by DuPont
—

 
247

Net transfers to DuPont
—

 
(2,857
)
Cash (used for) provided by financing activities
(108
)
 
803

Effect of exchange rate changes on cash
17

 
—

Increase in cash
17

 
247

Cash at beginning of period
366

 
—

Cash at end of period
$
383

 
$
247

 
 
 
 
Non-cash investing activities:
 
 
 
Change in property, plant and equipment included in accounts payable
$
10

 
$
(35
)
 
See accompanying notes to the interim consolidated financial statements.

6
Table of Contents
The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share amounts)


Note 1. Background and Description of the Business
The Chemours Company (Chemours or the Company) delivers customized solutions with a wide range of industrial and specialty chemical products for markets including plastics and coatings, refrigeration and air conditioning, general industrial, mining and oil refining. Principal products include titanium dioxide (TiO2), refrigerants, industrial fluoropolymer resins, sodium cyanide and sulfuric acid. Chemours consists of three reportable segments: Titanium Technologies, Fluoroproducts and Chemical Solutions.
Chemours is globally operated with manufacturing facilities, sales centers, administrative offices and warehouses located throughout the world. Chemours' operations are primarily located in the United States (U.S.), Canada, Mexico, Brazil, the Netherlands, Belgium, China, Taiwan, Japan, Switzerland, Singapore, Hong Kong, India, the United Kingdom and France. As of June 30, 2016, Chemours consists of 34 production facilities globally, five dedicated to Titanium Technologies, 16 dedicated to Fluoroproducts, 12 dedicated to Chemical Solutions (which includes nine production facilities of the Clean & Disinfect and Sulfur businesses classified as held-for-sale, see Note 6) and one that supports the Fluoroproducts and Chemical Solutions segments.
Effective prior to the opening of trading on the New York Stock Exchange (NYSE) on July 1, 2015 (the Distribution Date), E. I. du Pont de Nemours and Company (DuPont) completed the previously announced separation of the businesses comprising DuPont’s Performance Chemicals reporting segment, and certain other assets and liabilities, into Chemours, a separate and distinct public company. The separation was completed by way of a distribution of all of the then-outstanding shares of common stock of Chemours through a dividend in kind of Chemours’ common stock (par value $0.01) to holders of DuPont common stock (par value $0.30) as of the close of business on June 23, 2015 (the Record Date) (the transaction referred to herein as the Distribution).
On the Distribution Date, each holder of DuPont's common stock received one share of Chemours' common stock for every five shares of DuPont's common stock held on the Record Date. The separation was completed pursuant to a Separation Agreement and other agreements with DuPont related to the separation, including an Employee Matters Agreement, a Tax Matters Agreement, a Transition Services Agreement and an Intellectual Property Cross-License Agreement. These agreements govern the relationship between Chemours and DuPont following the separation and provided for the allocation of various assets, liabilities, rights and obligations. These agreements also include arrangements for transition services to be provided by DuPont to Chemours.
Unless the context otherwise requires, references in these Notes to the Consolidated Financial Statements to “we,” “us,” “our,” “Chemours” and the “Company” refer to The Chemours Company and its consolidated subsidiaries after giving effect to the Distribution.
Note 2. Basis of Presentation
The accompanying interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) for interim financial information. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included. Results for interim periods should not be considered indicative of results for a full year and the year-end consolidated balance sheet does not include all disclosures required by accounting principles generally accepted in the United States of America. As such, these interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015. Unless otherwise stated, references to years and three and six month periods relate to Chemours' fiscal years and three and six month periods. Certain reclassifications of prior year's data have been made to conform to current period presentation.
Chemours did not operate as a separate, stand-alone entity for the full period covered by the 2015 interim consolidated financial statements. Prior to our separation on July 1, 2015, Chemours operations were included in DuPont's financial results in different legal forms, including but not limited to wholly-owned subsidiaries for which Chemours was the sole business, components of legal entities in which Chemours operated in conjunction with other DuPont businesses and a majority owned joint venture. For periods prior to July 1, 2015, the interim consolidated financial statements have been prepared from DuPont’s historical accounting records and are presented on a stand-alone basis as if the business operations had been conducted independently from DuPont. DuPont and its subsidiaries’ net investments in these operations are shown in lieu of Stockholder’s Equity in the interim consolidated financial statements for the period ended June 30, 2015. The interim consolidated financial statements for the period ended June 30, 2015 include the historical operations, assets and liabilities of the legal entities that were considered to comprise the Chemours business, including certain environmental remediation and litigation obligations for which Chemours has indemnified DuPont.

7
Table of Contents
The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share amounts)

All of the allocations and estimates in the interim consolidated financial statements prior to July 1, 2015 were based on assumptions that management believes are reasonable. However, the interim consolidated financial statements for the three and six months ended June 30, 2015 included herein may not be indicative of the results of operations and cash flows of Chemours in the future or if Chemours had been a separate, stand-alone entity during those periods.
The net transfers from DuPont in the Interim Consolidated Statements of Stockholders’ Equity for the six months ended June 30, 2015 include a non-cash contribution from DuPont of $93. This non-cash contribution occurred during physical separation activities at shared production facilities in the United States prior to the separation.
Note 3. Recent Accounting Pronouncements
In March through May 2016, the Financial Accounting Standards Board (FASB) issued various updates to the Accounting Standards Update (ASU) No. 2014-09, “Revenue from contracts with customers (Topic 606).” The additional updates provide further clarifications on certain objectives and application of the core principle of Topic 606 for recognizing revenue. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The guidance is effective for public entities for annual and interim periods beginning after December 15, 2016 (original effective date), with one year deferral permitted from the original effective date. Chemours is currently evaluating the impact of adopting the guidance on its financial positions and results of operations and expects to adopt the guidance effective January 1, 2018.
In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718).” The update sets forth areas for simplification within several aspects of the accounting for shared-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this update are effective for fiscal periods, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted for any entity in any interim or annual period. Chemours is currently evaluating the impact of adopting this guidance but does not expect the adoption will have a significant impact on its financial position or results of operations.
Also, in March 2016, the FASB issued ASU 2016-07, “Investments—Equity Method and Joint Ventures (Topic 323).” The amendments eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Earlier application is permitted. Adoption of this guidance is not expected to have a significant impact on the Company's financial position or results of operations.
Further, in March 2016, the FASB issued ASU 2016-06, “Derivatives and Hedging (Topic 815), Contingent Put and Call Options in Debt Instruments,” which clarifies Topic 815 requirements for assessing whether contingent call and/or put options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments in this update is required to assess the embedded call and/or put options solely in accordance with the four-step decision sequence. The amendments in this update are effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, and the entity should apply the amendments on a modified retrospective basis to existing debt instruments as of the beginning of the fiscal year for which the amendments are effective. Adoption of this guidance is not expected to have a significant impact on the Company's financial position or results of operations.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which supersedes the leases requirements in Topic 840. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases in accordance with FASB Concepts Statement No. 6, Elements of Financial Statements, and, therefore, recognition of those lease assets and lease liabilities represents an improvement over previous GAAP, which did not require lease assets and lease liabilities to be recognized for most leases. A qualitative disclosure along with specific quantitative disclosures is required to provide enough information to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an entity’s leasing activities. Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach, which includes a number of optional practical expedients that entities may elect to apply. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within

8
Table of Contents
The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share amounts)

those fiscal years. Early application of the amendments in this update is permitted for all entities. Chemours is currently evaluating the impact of adopting this guidance on its financial position, results of operations and debt covenants.
In May 2015, the FASB issued ASU No. 2015-07, “Fair Value Measurement (Topic 820) - Disclosures for Investment in Certain Entities that Calculate Net Asset Value per Share or its Equivalent.” This guidance removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The guidance also removes the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. The amendment is effective for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. A reporting entity should apply the amendments retrospectively to all periods presented and earlier application is permitted. Chemours adopted this guidance effective January 1, 2016. The adoption did not have a significant effect on our financial position or results of operations.
In April 2015, the FASB issued ASU 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement,” which provides guidance about whether a cloud computing arrangement includes a software license. The customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If the cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. This guidance is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015, and early adoption is permitted. Chemours adopted this guidance effective January 1, 2016 prospectively to all arrangements entered into or materially modified after the effective date. The adoption did not have a significant impact on our financial position or results of operations.
In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis.” The amendments modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities and eliminate the presumption that a general partner should consolidate a limited partnership. The amendment is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Chemours adopted this guidance effective January 1, 2016 and the adoption did not change our consolidated entities, and therefore had no effect on our financial position, results of operations and cash flows.
In June 2014, the FASB issued ASU No. 2014-12, “Compensation-Stock Compensation (Topic 718),” which requires an entity to treat a performance target that affects vesting and that could be achieved after the requisite service period as a performance condition in accordance with existing guidance in Topic 718. The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Chemours adopted this guidance, effective January 1, 2016, prospectively to all awards granted or modified after the effective date. The adoption did not have a significant effect on our financial position or results of operations.
Note 4. Relationship with DuPont and Related Entities
Prior to the separation, including the three and six months ended June 30, 2015, Chemours sold finished goods to DuPont and its non-Chemours businesses. Related party sales to DuPont recorded by Titanium Technologies, Fluoroproducts and Chemical Solutions for the three months ended June 30, 2015 were $1, $16 and $11, respectively, and for the six months ended June 30, 2015 were $2, $34, and $21, respectively. Subsequent to the separation, beginning on July 1, 2015, transactions with DuPont businesses were not considered related party transactions.
Also prior to the separation, DuPont incurred significant corporate costs for services provided to Chemours as well as other DuPont businesses. These costs included expenses for information systems, accounting, other financial services such as treasury and audit, purchasing, human resources, legal, facilities, engineering, corporate research and development, corporate stewardship, marketing and business analysis support. A portion of these costs benefited multiple or all DuPont businesses, including Chemours, and were allocated to Chemours and its reportable segments using methods based on proportionate formulas involving total costs or other various allocation methods that management considered consistent and reasonable. Other Chemours corporate costs are not allocated to the reportable segments and are reported in Corporate and Other.
The allocated leveraged functional service expenses and general corporate expenses included in the Interim Consolidated Statements of Operations were $116 and $238 for the three and six months ended June 30, 2015, respectively, and were recorded within cost of goods sold, selling, general and administrative expense and research and development expense for $10, $100 and $6, respectively, for the three months ended June 30, 2015 and $23, $205, and $10, respectively, for the six months ended June 30, 2015. Subsequent

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The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share amounts)

to the separation on July 1, 2015, transactions with DuPont businesses were not considered related party transactions. Accordingly, no costs from DuPont were allocated to Chemours for the three and six months ended June 30, 2016.
Cash Management and Financing
The separation agreements set forth a process to true-up cash and working capital transferred to us from DuPont at separation.  In January 2016, Chemours and DuPont entered into an agreement, contingent upon the credit agreement amendment (described in Note 15), which provided for the extinguishment of payment obligations of cash and working capital true-ups previously contemplated in the separation agreements.  As a result, Chemours was not required to make any payments to DuPont, nor did DuPont make any payments to Chemours. 
In addition, the agreement set forth an advance payment by DuPont of approximately $190, which Chemours received in February 2016, for certain specified goods and services that Chemours expects to provide to DuPont over twelve to fifteen months under existing agreements between the parties. The advance payment was recorded as deferred liability included in other accrued liabilities of the Interim Consolidated Balance Sheets and approximately $131 remain outstanding as of June 30, 2016.
Tax Matters Agreement
Chemours and DuPont entered into a tax matters agreement that governs the parties’ respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes.  In general, under the agreement, DuPont is responsible for any U.S. federal, state and local taxes (and any related interest, penalties or audit adjustments) reportable on a consolidated, combined or unitary return that includes DuPont or any of its subsidiaries and Chemours and/or any of its subsidiaries for any periods or portions thereof ending on or prior to the date of the separation and Chemours is responsible for any U.S. federal, state, local and foreign taxes (and any related interest, penalties or audit adjustments) that are imposed on Chemours and/or any of its subsidiaries for all tax periods, whether before or after the date of the separation.
Note 5. Employee Separation and Asset Related Charges, Net
For the three and six months ended June 30, 2016 and 2015, Chemours recorded charges for employee separation and other restructuring related charges as follows:
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Employee separation (credit) charges
 
$
(2
)
 
$
61

 
$
2

 
$
61

Decommissioning and other charges
 
11

 
—

 
25

 
—

Asset related charges - Impairment 1
 
58

 
—

 
58

 
—

Total
 
$
67

 
$
61

 
$
85

 
$
61

 
1 
Represents an asset impairment in connection with the sale of the Sulfur business. See Note 6 for further information.


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The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share amounts)

The restructuring program charges impacted segment earnings for the three and six months ended June 30, 2016 and 2015 as follows:
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Plant and product line closures
 
 
 
 
 
 
 
 
Titanium Technologies
 
$
9

 
$
—

 
$
18

 
$
—

Fluoroproducts
 
1

 
—

 
5

 
—

Chemical Solutions
 
(1
)
 
—

 
—

 
—

Total
 
$
9

 
$
—

 
$
23

 
$
—

 
 
 
 
 
 
 
 
 
2015 Global restructuring 1
 
 
 
 
 
 
 
 
Titanium Technologies
 
$
—

 
$
23

 
$
2

 
$
23

Fluoroproducts
 
—

 
25

 
2

 
25

Chemical Solutions
 
—

 
13

 
—

 
13

Total
 
$
—

 
$
61

 
$
4

 
$
61

 
1 Includes approximately $13 related to Corporate overhead functions that was allocated to our segments for the three and six months ended June 30, 2015.
As a result of the decommissioning and dismantling activities due to the closure of the Edge Moor manufacturing plant in the U.S., the Company recorded charges of approximately $9 and $18 for the three and six months ended June 30, 2016, respectively, in the Titanium Technology segment. The decommissioning, dismantling and removal activities will continue for the remainder of 2016 through early 2017 and the Company expects to incur additional charges of approximately $30, which will be expensed as incurred.
The Company's Fluoroproducts segment also recorded charges of approximately $1 and $5 for the three and six months ended June 30, 2016, respectively, related to decommissioning, dismantling and removal activities on certain of its production lines in the U.S. The Company also expects to incur an additional $5 for dismantling and removal costs in the remainder of 2016 through early 2017, which will be expensed as incurred.
The plant and product line closures for Titanium Technologies and Fluoroproducts segments were implemented in the third quarter of 2015. As such, no restructuring related expenses were incurred in the three and six months ended June 30, 2015.
Prior to the separation, in the second quarter of 2015, the Company implemented a restructuring plan, which resulted in a global workforce reduction of more than 430 positions and a pre-tax charge of $61 for employee separation costs in the three and six months ended June 30, 2015. The actions associated with these charges and related payments are substantially completed at June 30, 2016.
After the separation, in the fourth quarter 2015, the Company announced an additional global workforce reduction as part of its ongoing efforts to streamline and simplify its organizational structure and reduce costs. The Company incurred an additional $4 of employee separation costs for the six months ended June 30, 2016 in connection with this restructuring plan. The actions associated with these charges are expected to be completed by the end of 2016 and related payments are expected to be substantially complete in 2017.

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The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share amounts)

The following table shows the change in the employee separation related liability account associated with the restructuring programs:
 
 
Titanium Technologies Site Closures
 
Fluoroproducts Lines Shutdown
 
Chemical Solutions Site Closures
 
2015 Global Restructuring
 
Total
Balance as of December 31, 2015
 
$
11

 
$
2

 
$
12

 
$
73

 
$
98

Charges (credits) to income for the six months ended June 30, 2016 1
 
—

 
—

 
(2
)
 
4

 
2

Charges to liability accounts:
 
 
 
 
 
 
 
 
 

Payments
 
(4
)
 
(1
)
 
—

 
(36
)
 
(41
)
Net currency translation and other adjustment 2
 
—

 
—

 
—

 
—

 
—

Balance as of June 30, 2016
 
$
7

 
$
1

 
$
10

 
$
41

 
$
59

 
1 
Due to unexpected resignations of certain employees at the Company's Niagara site, approximately $2 of employee separation charges, related to the Chemical Solutions Niagara site closure action announced in the fourth quarter of 2015, were reversed to income in the three and six months ended June 30, 2016.
2 
Net currency translation adjustment was less than $1 for the period presented.
There are no significant outstanding liabilities related to the decommissioning and other restructuring related charges.
Note 6. Sales of Assets and Businesses
On June 13, 2016, the Company entered into an asset purchase agreement with Veolia North America, (“Veolia”), pursuant to which Veolia agreed to acquire Chemours’ Sulfur Products business (“Sulfur business”) of its Chemical Solutions segment for a purchase price of $325 in cash, subject to customary working capital and other adjustments, of which approximately $10 was received in May 2016. As a result, as of June 30, 2016, the related assets of the Sulfur business of approximately $339 were classified as held-for-sale on the Interim Consolidated Balance Sheets, net of an impairment loss of approximately $58 which was recorded for the period ended June 30, 2016 in “Employee separation and asset related charges, net” related to this transaction. The approximately $10 proceeds were recorded in “Other current liabilities” on the Interim Consolidated Balance Sheets. The Company completed the sale and received the remaining proceeds of approximately $311 on July 29, 2016, net of estimated working capital adjustments. The completion of the sale is also subject to certain customary post-closing conditions and other adjustments.
On April 22, 2016, the Company entered into a stock and asset purchase agreement with LANXESS Corporation, (“Lanxess”), pursuant to which Lanxess agreed to acquire Chemours’ Clean & Disinfect product line (the “C&D business”) of its Chemical Solutions segment by acquiring certain Chemours' subsidiaries, including a guarantor subsidiary, and assets comprising the C&D business for a purchase price of $230 in cash, subject to customary working capital and other adjustments. As a result, as of June 30, 2016, the C&D business’ assets of approximately $39, including goodwill of approximately $13, and liabilities of approximately $4 were classified as held-for-sale on the Interim Consolidated Balance Sheets. The $4 of liabilities held-for-sale were included within the caption “Other accrued liabilities”. The Company expects to record a pre-tax gain of approximately $185 (subject to customary working capital and other adjustments) when the transaction closes, which is expected to occur in the second half of 2016. The completion of the transaction is subject to certain customary closing conditions and regulatory approvals.
In November 2015, the Company signed a definitive agreement to sell its aniline facility in Beaumont, Texas to The Dow Chemical Company (Dow). The transaction closed on March 1, 2016 and Chemours received $140 in cash from Dow. The net book value of the assets disposed was $41, which includes inventories, property, plant and equipment, other assets and allocated goodwill, and the Company incurred approximately $11 of transaction and other related charges. As a result, for the six months ended June 30, 2016, Chemours recognized a pre-tax gain of approximately $88 in the Chemical Solutions segment.

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The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share amounts)

The major components of assets held-for-sale are as follows:
 
 
June 30, 2016
 
December 31, 2015

Current assets:
 
 
 
 
Accounts receivables
 
$
21

 
$
—

Inventories
 
5

 
5

Total current assets
 
26

 
5

Property, plant and equipment, net
 
260

 
30

Goodwill
 
13

 
4

Other assets
 
137

 
7

Less: Impairment loss
 
(58
)
 
—

Total non-current assets, net
 
352

 
41

Total assets held-for-sale, net
 
$
378

 
$
46

Note 7. Other Income (Expense), Net
 
Three months ended June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015
Leasing, contract services and miscellaneous income 1
$
5

 
$
—

 
$
12

 
$
4

Royalty income 2
6

 
2

 
9

 
7

(Loss) gain on sale of assets and business 3
(1
)
 
—

 
88

 
—

Exchange (losses) gains, net 4
(14
)
 
19

 
(20
)
 
3

Total other (expense) income, net
$
(4
)
 
$
21

 
$
89

 
$
14

 
1 Miscellaneous income includes accrued interest related to unrecognized tax benefits.
2 Royalty income is primarily for technology and trademark licensing.
3 The six months ended June 30, 2016 includes gain on sale of the aniline facility in Beaumont, TX. See Note 6 for additional information.
4 Exchange losses, net includes gains and loss on foreign currency forward contracts. See Note 17 for additional information.
Note 8. Income Taxes 
For the three months ended June 30, 2016 and 2015, Chemours recorded a tax benefit of $23 and $0, respectively, or an effective income tax rate of approximately 56% and 0%, respectively. For the six months ended June 30, 2016 and 2015, Chemours recorded a benefit from income tax of $5 and a provision for income tax of $15 or an effective income tax rate of negative 18% and 38%, respectively.
The $23 and $20 increases in tax benefits for the three and six months ended June 30, 2016, respectively, and the corresponding changes in the effective income tax rates were primarily due to the geographical mix of earnings. Restructuring charges and asset impairment, most of which occurred in the United States, resulted in an increase in tax benefit and a corresponding change in the effective income tax rate for 2016 as compared to 2015. In addition, the increase in tax benefit for the six months ended June 30, 2016 was partially offset by the gain on sale of the aniline facility in the U.S.

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The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share amounts)

Note 9. Earnings Per Share of Common Stock
The table below shows a reconciliation of the numerator and denominator for basic and diluted earnings per share calculations for the periods indicated:
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Numerator:
 
 
 
 
 
 
 
 
Net (loss) income attributable to Chemours
 
$
(18
)
 
$
(18
)
 
$
33

 
$
25

Denominator:
 
 
 
 
 
 
 
 
Weighted-average number of common shares outstanding - Basic 1
 
181,477,672

 
180,966,833

 
181,379,419

 
180,966,833

Dilutive effect of the company's employee compensation plans  2
 
—

 
—

 
668,410

 
—

Weighted average number of common shares outstanding - Diluted 2
 
181,477,672

 
180,966,833

 
182,047,829

 
180,966,833

 
1 For June 30, 2015, pro forma earnings per share was calculated based on 180,966,833 shares of Chemours common stock that were distributed to DuPont shareholders on July 1, 2015.
2 Diluted earnings per share is calculated using net income available to common shareholders divided by diluted weighted-average shares of common shares outstanding during each period, which includes unvested restricted shares. Diluted earnings per share considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect.
The following average number of stock options were antidilutive and, therefore, were not included in the diluted earnings per share calculation:
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Average number of stock options
 
7,356,050

 
—

 
8,028,762

 
—

Note 10. Accounts and Notes Receivable – Trade, Net
 
 
June 30, 2016
 
December 31, 2015
Accounts receivable—trade, net 1
 
$
849

 
$
759

VAT, GST and other taxes 2 
 
74

 
68

Leases receivable—current 3
 
—

 
13

Other receivables 4
 
16

 
19

Total
 
$
939

 
$
859

 
1  
Accounts receivable – trade, net includes trade notes receivable and is net of allowances of $4 and $4 as of June 30, 2016 and December 31, 2015, respectively. Allowances are equal to the estimated uncollectible amounts.
2  
Value Added Tax (VAT) and Goods and Services Tax (GST).
3 
See Note 14 for information relating to direct financing leases.
4  
Other receivables consist of advances and other deposits.
Accounts and notes receivable are carried at amounts that approximate fair value. Bad debt expense was less than $1 for the three and six months ended June 30, 2016 and 2015.

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The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share amounts)

Note 11. Inventories 
 
June 30, 2016
 
December 31, 2015
Finished products
$
628

 
$
613

Semi-finished products
169

 
172

Raw materials, stores and supplies
332

 
433

Subtotal
1,129

 
1,218

Adjustment of inventories to a last-in, first-out (LIFO) basis
(237
)
 
(246
)
   Total
$
892

 
$
972

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 U.S. locations, which comprised $640 and $744 or 57% and 61% of inventories before the LIFO adjustments at June 30, 2016 and December 31, 2015, respectively. The remainder of inventory held in international locations and certain U.S. locations is valued under the average cost method.
Note 12. Property, Plant and Equipment
Depreciation expense amounted to $73 and $138 for the three and six months ended June 30, 2016, respectively, and $66 and $129 for the three and six months ended June 30, 2015, respectively. Property, plant and equipment includes gross assets under capital leases of $7 at June 30, 2016 and December 31, 2015.
Note 13. Goodwill and Other Intangible Assets, Net
Goodwill: The following table summarizes changes in the carrying amount of goodwill by reportable segment:
 
 
Titanium Technologies
 
Fluoroproducts
 
Chemical Solutions
 
Total
Balance as of December 31, 2015
 
$
13

 
$
85

 
$
68

 
$
166

Asset held-for-sale 1
 
—

 
—

 
(13
)
 
(13
)
Currency translation adjustment 2
 
—

 
—

 
—

 
—

Balance as of June 30, 2016
 
$
13

 
$
85

 
$
55

 
$
153

 
1 
Represents the reclassification of goodwill to assets held-for-sale in connection with the sale of the C&D business (See Note 6).
2 
Net currency translation adjustment was less than $1 for the period presented.
Other Intangible Assets, Net: The following table summarizes the gross carrying amounts and accumulated amortization of other intangible assets by major class:
 
June 30, 2016
 
December 31, 2015
 
Gross
 
Accumulated
Amortization
 
Net
 
Gross
 
Accumulated
Amortization
 
Net
Customer lists
$
12

 
$
(10
)
 
$
2

 
$
13

 
$
(10
)
 
$
3

Patents
19

 
(17
)
 
2

 
19

 
(17
)
 
2

Purchased trademarks
5

 
(2
)
 
3

 
5

 
(2
)
 
3

Purchased and licensed technology
3

 
(2
)
 
1

 
8

 
(6
)
 
2

Total
$
39

 
$
(31
)
 
$
8

 
$
45

 
$
(35
)
 
$
10


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The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share amounts)

The aggregate amortization expense for definite-lived intangible assets was $1 for the three and six months ended June 30, 2016, respectively, and $1 and $2 for the three and six months ended June 30, 2015, respectively. Definite-lived intangible assets are amortized over their estimated useful lives, generally for periods ranging from 5 to 20 years. There are no material indefinite-lived intangible assets.
The estimated amortization for the remainder of 2016 and each of the succeeding four years is:
Remainder of 2016
 
$
1

2017
 
2

2018
 
1

2019
 
1

2020
 
1

Note 14. Other Assets
 
 
June 30, 2016
 
December 31, 2015
Leases receivable - non-current 1
 
$
—

 
$
125

Capitalized repair and maintenance costs
 
111

 
149

Pension assets 2
 
164

 
138

Deferred income taxes - non-current
 
46

 
47

Miscellaneous 3
 
48

 
49

Total
 
$
369

 
$
508

 
1 
Relates to Sulfur business which was reclassified to assets held-for-sale as of June 30, 2016. See Direct Financing Leases below.
2 Pension assets represent the funded status of certain of the Company's long-term employee benefit plans.
3 Miscellaneous includes deferred financing fees related to the Revolving Credit Facility of $15 and $19 as of June 30, 2016 and December 31, 2015, respectively.
Direct Financing Leases
At two of its facilities in the U.S. (Borderland and Morses Mill), Chemours has constructed fixed assets on land that it leases from third parties. Management has analyzed these arrangements and determined these assets represent a direct financing lease, whereby Chemours is the lessor of this equipment. Chemours has recorded leases receivable of $131 and $138 at June 30, 2016 and December 31, 2015 respectively, which represent the balance of the minimum future lease payments receivable. The current portion of leases receivable was previously included in accounts and notes receivable - trade, net, as shown in Note 10. The long-term portion of leases receivable was previously included in other assets, as shown above. These lease receivables have been included in the sale of the Sulfur business as discussed in Note 6, and were reclassified as assets held-for-sale as of June 30, 2016.

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The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share amounts)

Note 15. Debt
Long-term debt was comprised of the following at June 30, 2016 and December 31, 2015:
 
 
June 30, 2016
 
December 31, 2015
Long-term debt:
 
 
 
 
Senior secured term loan
 
$
1,435

 
$
1,493

Senior unsecured notes:
 
 
 
 
6.625%, due May 2023
 
1,308

 
1,350

7.00%, due May 2025
 
750

 
750

6.125%, due May 2023 (€360)
 
398

 
395

Other
 
23

 
26

Total
 
3,914

 
4,014

Less: Unamortized issue discount on senior secured term loan
 
6

 
7

Less: Unamortized debt issuance costs
 
49

 
53

Less: Current maturities
 
36

 
39

Total long-term debt
 
$
3,823

 
$
3,915

Senior Secured Credit Facilities
During the first quarter of 2016, Chemours and its Revolving Credit Facility lenders entered into a second amendment to the credit agreement that (a) replaced the total net leverage ratio financial covenant with a senior secured net leverage ratio financial covenant; (b) reduced the minimum levels required by the interest expense coverage ratio covenant; (c) increased the limits and extended the period of adding back the benefits of announced cost reduction initiatives in the determination of Consolidated EBITDA for the purposes of calculating the financial maintenance covenants; and (d) reduced the revolver commitment from $1,000 to $750. As a result of the amendment, the Company recorded a charge of approximately $4 to write off a proportionate amount of unamortized debt issuance costs attributable to the reduction in revolver commitment, which was included in interest expense, net. Fees and expenses of approximately $2 incurred in connection with the amendment were capitalized in other assets of the Interim Consolidated Balance Sheets, which will be amortized to interest expense on a straight-line basis over the remaining term of the Revolving Credit Facility.
The credit agreement contains financial covenants which, solely with respect to the Revolving Credit Facility as amended, require Chemours not to exceed a maximum senior secured net leverage ratio of 3.50 to 1.00 each quarter through December 31, 2016, 3.00 to 1.00 through June 30, 2017 and further decreasing by 0.25 to 1.00 every subsequent six months to 2.00 to 1.00 by January 1, 2019 and thereafter. Chemours is also required to maintain a minimum interest coverage ratio of 1.75 to 1.00 each quarter through June 30, 2017 and further increasing by 0.25 to 1.00 every subsequent six months to 3.00 to 1.00 by January 1, 2019 and thereafter. In addition, the credit agreement contains customary affirmative and negative covenants that, among other things, limit or restrict Chemours and its subsidiaries' ability, subject to certain exceptions, to incur liens, merge, consolidate or sell, transfer or lease assets, make investments, pay dividends, transact with subsidiaries and incur indebtedness. The credit agreement also contains customary representations and warranties and events of default. Chemours was in compliance with its debt covenants as of June 30, 2016.
During the second quarter 2016, the Company repurchased through open market transactions an aggregate principal amount of $50 of its senior secured term loans for $49 in cash. We recorded in “interest expense, net” of the Interim Consolidated Statements of Operations less than $1 gain on extinguishment of debt, net of approximately less than $1 charge related to the write-off of deferred financing costs and issue discount associated with the extinguished debt.
Senior Unsecured Notes
Chemours entered into a registration rights agreement in connection with the issuance on May 12, 2015 of $1,350 aggregate principal amount of its 6.625% Senior Notes due 2023 (the “2023 Notes”), $750 aggregate principal amount of its 7.000% Senior Notes due 2025 (the “2025 Notes”) and €360 aggregate principal amount of its 6.125% Senior Notes due 2023 (the “Euro Notes,” and together with the 2023 Notes and the 2025 Notes, the “Notes”).  Under the registration rights agreement, Chemours agreed

17
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The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share amounts)

to file with the SEC within 465 days after the original issue date of the Notes a registration statement for the exchange offer of the Notes for new registered notes with identical terms.  Chemours filed with the SEC a registration statement on Form S-4 with respect to the exchange offer on March 18, 2016, which was declared effective on April 12, 2016, and the exchange offer was completed on May 19, 2016.  In addition, on May 5, 2016, the Euro Notes were admitted to listing on the Official List and trading on the Global Exchange Market of the Irish Stock Exchange.
During the second quarter 2016, the Company repurchased through open market transactions an aggregate principal amount of $42 of its 2023 Notes for $36 in cash. We recorded in “interest expense, net” of the Consolidated Statements of Operations a $5 gain on extinguishment of debt, net of approximately $1 charge related to the write-off of deferred financing costs associated with the extinguished debt.
Maturities
There are no debt maturities prior to year 2022, except, in accordance with the credit agreement, Chemours has required quarterly principal payments related to the Term Loan Facility equivalent to 1.00% per annum beginning September 2015 through March 2022, with the balance due at maturity. Term Loan principal maturities over the next five years are $8 for the remainder of 2016 and $15 in each year from 2017 to 2021. Debt maturities related to the Term Loan Facility and the Notes in 2022 and beyond will be $3,808.
In addition, following the end of each fiscal year commencing on the year ended December 31, 2016, the Company is also required to make additional principal repayments as defined in the credit agreement, depending on leverage level, equivalent to up to 50% of excess cash flow based on certain leverage targets with stepdowns to 25% and 0% as actual leverage decreases.
Debt Fair Value
The fair values of the Term Loan Facility, the 2023 Notes, the 2025 Notes and the Euro Notes at June 30, 2016 were approximately $1,392, $1,105, $628 and $312, respectively. The estimated fair values of the Term Loan Facility and the Notes are based on quotes received from third party brokers, and are classified as Level 2 in the fair value hierarchy.
Note 16. Commitments and Contingent Liabilities 
(a) Guarantees
Chemours has directly guaranteed various obligations of customers, suppliers and other third parties. As of June 30, 2016 and December 31, 2015, the maximum potential amount of future (undiscounted) payments that Chemours could be required to make under the guarantees in the event of default by the guaranteed parties is approximately $8. No amounts were accrued at June 30, 2016 and December 31, 2015.
(b) Litigation
In addition to the matters discussed below, Chemours, by virtue of its status as a subsidiary of DuPont prior to the separation, is subject to or required under the separation-related agreements executed prior to the separation to indemnify DuPont against various pending legal proceedings arising out of the normal course of the Chemours business including product liability, intellectual property, commercial, environmental and antitrust lawsuits. It is not possible to predict the outcome of these various proceedings. Except for the PFOA litigation for which a separate assessment is provided in this Note, while management believes it is reasonably possible that Chemours could incur losses in excess of the amounts accrued, if any, for the aforementioned proceedings, it does not believe any such loss would have a material impact on Chemours' consolidated financial position, results of operations or liquidity. With respect to the litigation matters discussed below, including PFOA litigation, management's estimate of the probability of loss in excess of the amounts accrued, if any, is addressed individually for each matter. In the event that DuPont seeks indemnification for adverse trial rulings or outcomes for any such matter relating to PFOA, these indemnification claims could materially adversely affect Chemours' financial condition. Disputes between Chemours and DuPont may also arise with respect to indemnification matters, including disputes based on matters of law or contract interpretation, or related to the type of damages or liabilities for which indemnification may be sought. If and to the extent these disputes arise, they could materially adversely affect Chemours.

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NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share amounts)

Asbestos
At June 30, 2016 and December 31, 2015, there were approximately 1,979 lawsuits and 2,212 lawsuits, respectively, pending against DuPont alleging personal injury from exposure to asbestos. These cases are pending in state and federal court in numerous jurisdictions in the U.S. and are individually set for trial. A small number of cases are pending outside the U.S. Most of the actions were brought by contractors who worked at sites between 1950 and the 1990s. A small number of cases involve similar allegations by DuPont employees. A limited number of the cases were brought by household members of contractors or DuPont employees. Finally, certain lawsuits allege personal injury as a result of exposure to DuPont products. At June 30, 2016 and December 31, 2015, Chemours had an accrual of $44 related to this matter. Chemours reviews this estimate and related assumptions quarterly and annually updates the results of an approximate 20-year projection. Management believes that the likelihood is remote that Chemours would incur losses in excess of the amounts accrued in connection with this matter.
Benzene
In the separation, DuPont assigned its Benzene docket to Chemours. At June 30, 2016 and December 31, 2015, there are 28 and 29, respectively, pending cases against DuPont alleging benzene-related illnesses. These cases consist of premises matters involving contractors and deceased former employees who claim exposure to benzene while working at DuPont sites primarily in the 1960s through the 1980s, and product liability claims based on alleged exposure to benzene found in trace amounts in aromatic hydrocarbon solvents used to manufacture DuPont products, such as paints, thinners and reducers.
A benzene case (Hood v. DuPont) was tried to a verdict in Texas state court on October 20, 2015. Plaintiffs alleged that Mr. Hood's Acute Myelogenous Leukemia (AML) was the result of 24 years of occupational exposure to trace benzene found in DuPont automotive paint products and that DuPont negligently failed to warn him that its paints, reducers and thinners contained benzene that could cause cancer or leukemia. The jury found in the Plaintiffs favor awarding $6.9 in compensatory damages and $1.5 in punitive damages. In March 2016, acting on the Company's motion, the Court struck the punitive award. Through DuPont, Chemours has filed an appeal on the remaining award based upon substantial errors made at the trial court. Plaintiffs have filed a cross appeal. Management believes that a loss is reasonably possible related to these matters; however, given the evaluation of each Benzene matter is highly fact driven and impacted by disease, exposure and other factors, a range of such losses cannot be reasonably estimated at this time.
PFOA
Prior to the fourth quarter of 2014, the performance chemicals segment of DuPont made PFOA (collectively, perfluorooctanoic acids and its salts, including the ammonium salt) at its Fayetteville plant (Fayetteville, North Carolina) and used PFOA as a processing aid in the manufacture of fluoropolymers and fluoroelastomers at certain sites including: Washington Works (Parkersburg, West Virginia), Chambers Works (Deepwater, New Jersey), Dordrecht Works (Netherlands), Changshu Works (China), and Shimizu (Japan). These sites are now owned and/or operated by Chemours.
Chemours had accruals of $19 and $20 related to the PFOA matters discussed below at June 30, 2016 and December 31, 2015, respectively. The accruals include charges related to DuPont’s obligations under agreements with the U.S. Environmental Protection Agency (EPA) and voluntary commitments to the New Jersey Department of Environmental Protection (NJDEP). These obligations and voluntary commitments include surveying, sampling and testing drinking water in and around certain company sites offering treatment or an alternative supply of drinking water if tests indicate the presence of PFOA in drinking water at or greater than the national Health Advisory. A provisional health advisory level was set in 2009 at 0.4 parts per billion (ppb) that includes PFOA in drinking water. In May 2016, the EPA announced a health advisory level of 0.07 ppb that includes PFOA in drinking water. As a result, we recorded an additional $4 during the three months ended June 30, 2016 based on management's best estimate of the impact of the new health advisory level on the company’s obligations to the EPA, which have expanded the testing and water supply commitments previously established. Based on prior testing, the Company has initiated additional testing and treatment in certain additional locations in and around Chambers Works and Washington Works plants. The Company will continue to work with the EPA regarding the extent of work that may be required with respect to these matters.
Drinking Water Actions
In August 2001, a class action, captioned Leach v. DuPont, was filed in West Virginia state court alleging that residents living near the Washington Works facility had suffered, or may suffer, deleterious health effects from exposure to PFOA in drinking water.
DuPont and attorneys for the class reached a settlement in 2004 that binds about 80,000 residents. In 2005, DuPont paid the plaintiffs’ attorneys’ fees and expenses of $23 and made a payment of $70, which class counsel designated to fund a community

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NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share amounts)

health project. Chemours, through DuPont, funded a series of health studies which were completed in October 2012 by an independent science panel of experts (the C8 Science Panel). The studies were conducted in communities exposed to PFOA to evaluate available scientific evidence on whether any probable link exists, as defined in the settlement agreement, between exposure to PFOA and human disease. The C8 Science Panel found probable links, as defined in the settlement agreement, between exposure to PFOA and pregnancy-induced hypertension, including preeclampsia, kidney cancer, testicular cancer, thyroid disease, ulcerative colitis and diagnosed high cholesterol.
In May 2013, a panel of three independent medical doctors released its initial recommendations for screening and diagnostic testing of eligible class members. In September 2014, the medical panel recommended follow-up screening and diagnostic testing three years after initial testing, based on individual results. The medical panel has not communicated its anticipated schedule for completion of its protocol. Through DuPont, Chemours is obligated to fund up to $235 for a medical monitoring program for eligible class members and, in addition, administrative cost associated with the program, including class counsel fees. In January 2012, Chemours, through DuPont, put $1 in an escrow account to fund medical monitoring as required by the settlement agreement. The court-appointed Director of Medical Monitoring has established the program to implement the medical panel’s recommendations and the registration process, as well as eligibility screening, is ongoing. Diagnostic screening and testing has begun and associated payments to service providers are being disbursed from the escrow account. As of June 30, 2016, less than $1 has been disbursed from the escrow account related to medical monitoring.
In addition, under the settlement agreement, DuPont must continue to provide water treatment designed to reduce the level of PFOA in water to six area water districts and private well users. At separation, this obligation was assigned to Chemours, which is included in the accrual amounts recorded as of June 30, 2016.
Class members may pursue personal injury claims against DuPont only for those human diseases for which the C8 Science Panel determined a probable link exists. At June 30, 2016 and December 31, 2015, there were approximately 3,500 lawsuits filed in various federal and state courts in Ohio and West Virginia, an increase of approximately 600 over year end 2014. These lawsuits are consolidated in multi-district litigation (MDL) in Ohio federal court. Based on the information currently available to the Company, the majority of the lawsuits allege personal injury claims associated with high cholesterol and thyroid disease from exposure to PFOA in drinking water. There are 30 lawsuits alleging wrongful death.
Although the majority of the plaintiffs in the MDL allege multiple diseases, the table below approximates the number of plaintiffs in each of the six probable link disease categories.
Alleged Injury
Approximate Number of Plaintiffs
Kidney cancer
200

Testicular cancer
70

Ulcerative colitis
300

Preeclampsia
200

Thyroid disease
1,430

High cholesterol
1,340

In the third quarter of 2014, six plaintiffs from the MDL were selected for individual bellwether trials.
All six bellwether cases in the MDL have now been tried, resolved, appealed or otherwise addressed. Two bellwether cases have been tried. The first case (Bartlett v. DuPont / kidney cancer) was tried to a verdict in October 2015. The jury found in favor of the plaintiff, awarding $1.1 in damages for negligence and $0.5 for emotional distress. The jury found that DuPont’s conduct did not warrant punitive damages. A second case  (Freeman v. DuPont / testicular cancer) was tried to verdict in July 2016.  The jury found in favor of the plaintiff awarding $5.1 in compensatory damages and $0.5 in punitive damages and attorneys’ fees. Court rulings made before and during both trials resulted in several significant grounds for appeal and an appeal to the Sixth Circuit has been filed for the first case. The Company, through DuPont, will pursue post-trial motions and appeals for the second case.
Three bellwether PFOA cases were settled in 2016 as trial approached. These cases (Wolf v. DuPont / ulcerative colitis, Dowdy v. DuPont / kidney cancer, Baker v. DuPont / kidney cancer) were settled for amounts well below the incremental cost of preparing for trials. To date, the settlements have been individually and in aggregate immaterial to the Company. The final case (Pugh v.

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NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share amounts)

DuPont / ulcerative colitis) was removed from the bellwethers when it was determined that the plaintiff did not suffer from the alleged disease.
The trial court announced that, starting in May 2017, 40 individual plaintiff trials will be scheduled for a 12-month period. With the conclusion of the six bellwether cases, the court moved two of the 40 matters (Vigneron v. DuPont / testicular cancer and Moody v. DuPont / testicular cancer) forward on July 19, 2016 and set the cases for trial on November 14, 2016 and January 17, 2017, respectively. The trial court’s multi-year plan pertains only to the approximately 270 cases claiming cancer. The remaining cases, comprising approximately 93% of the docket, will remain inactive.
A confidential mediation process that the court established early in this MDL is ongoing and expected to continue as the litigation proceeds.
Chemours, through DuPont, denies the allegations in these lawsuits and is defending itself vigorously. No other claims have been settled or resolved during the periods presented. DuPont is the named defendant in each of these cases and is directly liable for any judgment. If DuPont were to claim that it is entitled to indemnification from Chemours as to some or all of any judgment, Chemours retains its defenses to such claims.
PFOA Summary
While it is probable that the Company will incur costs related to the medical monitoring program discussed above, such costs cannot be reasonably estimated due to uncertainties surrounding the level of participation by eligible class members and the scope of testing. Chemours believes that it is probable that it could incur losses related to the MDL in Ohio federal court discussed above but a range of such losses cannot be reasonably estimated at this time. Given the wide range of outcomes associated with the six initial cases in the MDL as discussed above, including two cases that have been or will be appealed, the Company does not believe activity to date provides a reasonable basis to derive a range of loss for the remaining lawsuits still pending in the MDL in total or by category of claim. The possible range of loss is unpredictable and involves significant uncertainty due to the uniqueness of the individual MDL plaintiff's claims and the defenses to those claims, both as to potential liability and damages on an individual claim basis, and numerous unsettled legal issues, among other factors, such as general versus specific causation, lack of specific fact discovery allowed to date on vast majority of the cases, lack of validation of basic facts associated with plaintiffs and related claims, and the two bellwether cases tried to verdict to date did not inform of the many salient facts and legal issues needed for assessment of the other cases. The appellate courts will rule on both matters that have been tried. The Company believes there are strong common and individual grounds for appealing these verdicts and, if any such verdict is overturned, any subsequent verdict relying on such overturned ruling would likely also be overturned. In addition, as noted above, Chemours retains its defenses to related indemnification claims that may be received from DuPont. The trials and appeals of the MDL matters will occur over the course of many years. Significant unfavorable outcomes in a number of cases in the MDL could have a material adverse effect on Chemours' consolidated financial position, results of operations or liquidity.
(c) Environmental
Chemours, by virtue of its status as a subsidiary of DuPont prior to the separation, is subject to contingencies pursuant to environmental laws and regulations that in the future may require further action to correct the effects on the environment of prior disposal practices or releases of chemical substances by Chemours or other parties. Chemours accrues for environmental remediation activities consistent with the policy set forth in Note 3 to the consolidated financial statements in our Annual Report on Form 10-K. Much of this liability results from the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, often referred to as Superfund), RCRA and similar state and global laws. These laws require Chemours to undertake certain investigative, remediation and restoration activities at sites where Chemours conducts or once conducted operations or at sites where Chemours-generated waste was disposed. The accrual also includes estimated costs related to a number of sites identified for which it is probable that environmental remediation will be required, but which are not currently the subject of enforcement activities.
At June 30, 2016 and December 31, 2015, the Interim Consolidated Balance Sheets included a liability of $290 relating to these matters which, in management’s opinion, is appropriate based on existing facts and circumstances. The average time frame over which the accrued or presently unrecognized amounts may be paid, based on past history, is estimated to be 15 to 20 years. Remediation activities vary substantially in duration and cost from site to site. These activities, and their associated costs, depend on the mix of unique site characteristics, evolving remediation technologies, diverse regulatory agencies and enforcement policies, as well as the presence or absence of other potentially responsible parties. Therefore, considerable uncertainty exists with respect to environmental remediation costs and, under adverse changes in circumstances, the potential liability may range up to

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NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share amounts)

approximately $600 above the amount accrued at June 30, 2016. Except for Pompton Lakes, which is discussed further below, based on existing facts and circumstances, management does not believe that any loss, in excess of amounts accrued, related to remediation activities at any individual site will have a material impact on the financial position, liquidity or results of operations of Chemours.
Pompton Lakes
At June 30, 2016 and December 31, 2015, the environmental remediation accruals related to activities at Chemours’ site in Pompton Lakes, New Jersey were $86 and $87, respectively. Management believes that it is reasonably possible that remediation activities at this site could range up to $119 including previously accrued amounts. This could have a material impact on the liquidity of Chemours in any given period if recognized. However, management does not believe this would have a material adverse effect on Chemours' overall financial condition, liquidity or results of operations. During the twentieth century, blasting caps, fuses and related materials were manufactured at Pompton Lakes. Operating activities at the site were ceased in the mid-1990s. Primary contaminants in the soil and sediments are lead and mercury. Ground water contaminants include volatile organic compounds.
Under the authority of the EPA and the NJDEP, remedial actions at the site are focused on investigating and cleaning up the area. Ground water monitoring at the site is ongoing and Chemours, through DuPont, has installed and continues to install vapor mitigation systems at residences within the ground water plume. In addition, Chemours is further assessing ground water conditions. In June 2015, the EPA issued a modification to the site's RCRA permit that requires Chemours to dredge mercury contamination from a 36 acre area of the lake and remove sediment from two other areas of the lake near the shoreline. Chemours expects to spend about $50 over the next two to three years, which is included in the remediation accrual as of June 30, 2016, in connection with remediation activities at Pompton Lakes, including activities related to the EPA’s final plan. The remediation activities commenced when permits and implementation plans were approved in May 2016.
Note 17. Financial Instruments
Derivative Instruments
Foreign Currency Forward Contracts
Chemours uses foreign currency forward contracts to reduce its net exposure, by currency, related to non-functional currency-denominated monetary assets and liabilities of its operations so that exchange gains and losses resulting from exchange rate changes are minimized. These derivative instruments are not part of a cash flow hedge program or a fair value hedge program, and have not been designated as a hedge. Although all of the forward contracts are subject to an enforceable master netting agreement, Chemours has elected to present the derivative assets and liabilities on a gross basis on the balance sheets. No collateral has been required for these contracts. All gains and losses resulting from the revaluation of the derivative assets and liabilities are recognized in “other income (expense), net” in the statements of operations during the period in which they occurred.
At June 30, 2016, there were 47 foreign currency forward contracts outstanding with an aggregate gross notional value of $270. Chemours recognized in “other income, net” of the Interim Consolidated Statements of Operations net gain of $1 and a net loss of $1 for the three and six months ended June 30, 2016, respectively, and net gains of $23 and $12 for the three and six months ended June 30, 2015, respectively.
Net Investment Hedge - Foreign Currency Borrowings
Beginning on July 1, 2015, Chemours designated its €360 Euro Notes (see Note 15) as a hedge of its net investments in certain of its international subsidiaries that use the Euro as functional currency in order to reduce the volatility in stockholders’ equity caused by the changes in foreign currency exchange rates of the Euro with respect to the U.S. Dollar. Chemours used the spot method to measure the effectiveness of the net investment hedge. Under this method, for each reporting period, the change in the carrying value of the Euro Notes due to remeasurement of the effective portion is reported in accumulated other comprehensive income on the balance sheet and the remaining change in the carrying value of the ineffective portion, if any, is recognized in “other income (expense), net” in the statements of operations. Chemours evaluates the effectiveness of its net investment hedge quarterly. For the three and six months ended June 30, 2016, Chemours did not record any ineffectiveness and recognized a gain of $4 and a loss of $3, respectively, on its net investment hedges in accumulated other comprehensive income (loss).
Fair Value of Derivative Instruments
The table below presents the fair value of Chemours’ derivative assets and liabilities within the fair value hierarchy:

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NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share amounts)

 
 
Fair Value Using Level 2 Inputs
 
Balance Sheet Location
June 30, 2016
 
December 31, 2015
Asset derivatives:
 
 
 
 
Foreign currency forward contracts
Accounts and notes receivable - trade, net
$
2

 
$
2

     Total asset derivatives
 
$
2

 
$
2

 
 
 
 
 
Liability derivatives
 
 
 
 
Foreign currency forward contracts
Other accrued liabilities
$
2

 
$
2

     Total liability derivatives
 
$
2

 
$
2

We classify our foreign currency forward contracts as Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments. For derivative assets and liabilities, standard industry models are used to calculate the fair value of the various financial instruments based on significant observable market inputs, such as foreign exchange rates and implied volatilities obtained from various market sources. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance/quality checks.
Note 18. Long-Term Employee Benefits
The components of net periodic benefit (income) cost for all significant pension plans were as follows:
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Service cost
 
$
4

 
$
3

 
$
7

 
$
6

Interest cost
 
5

 
4

 
10

 
9

Expected return on plan assets
 
(17
)
 
(20
)
 
(33
)
 
(41
)
Amortization of actuarial net loss
 
7

 
3

 
11

 
7

Amortization of prior service cost (gain)
 
—

 
1

 
(1
)
 
2

Curtailment gain
 
(2
)
 
—

 
(2
)
 
—

Net periodic benefit income
 
$
(3
)
 
$
(9
)
 
$
(8
)
 
$
(17
)
The net periodic benefit income is based on estimated values and an extensive use of assumptions about the discount rate, expected return on plan assets and the rate of future compensation increases received by the Company’s employees.
Chemours made cash contributions of $5 and $9 to its pension plans during the three and six months ended June 30, 2016, respectively, and expects to make additional cash contributions of $9 to the pension plan during the remainder of 2016.
Participation in the DuPont Plans
Prior to July 1, 2015, Chemours participated in DuPont’s U.S. and non-U.S. benefit plans, except in the Netherlands and Taiwan, as though its employees were participants in a multi-employer plan with the other businesses of DuPont. As a result, for the three and six months ended June 30, 2015, Chemours recognized $26 and $53, respectively, of pension and other long-term benefit expenses allocated by DuPont based on Chemours' active employee headcount.
Note 19. Stock-based Compensation
Total stock-based compensation cost included in the Interim Consolidated Statements of Operations was $5 and $3 for the three months ended June 30, 2016 and 2015, respectively, and $10 and $5 for the six months ended June 30, 2016 and 2015, respectively. The income tax benefits related to stock-based compensation arrangements were $2 and $1 for the three months ended June 30, 2016 and 2015, respectively, and $4 and $2 for the six months ended June 30, 2016 and 2015, respectively.

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NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share amounts)

Stock-based compensation expense in prior years and until separation on July 1, 2015 was allocated to Chemours based on the portion of DuPont’s incentive stock program in which Chemours employees participated. Adopted at separation, the Chemours Equity and Incentive Plan grants certain employees, independent contractors, or non-employee directors of the Company different forms of awards, including stock options and restricted stock units (RSUs). The Equity and Incentive Plan has a maximum shares reserve of 13,500,000 for the grant of equity awards plus the number of shares of DuPont equity awards that converted into new Chemours equity awards. The Chemours Compensation Committee determines the long-term incentive mix, including stock options and RSUs, and may authorize new grants annually. As of June 30, 2016, 8,594,630 shares of the Equity and Incentive Plan reserve are still available for grants. Subject to vesting conditions of the award, a retirement eligible employee retains any granted awards upon retirement provided the employee has rendered at least six months of service following the grant date.
Stock Options
During 2016, Chemours granted non-qualified options to certain of its employees, which will serially vest over a three-year period and expire 10 years from the date of grant. The expense related to stock options granted in the six months ended June 30, 2016 was based on the weighted-average assumptions shown in the table below. No stock options were granted by Chemours in the three and six months ended June 30, 2015.
Weighted-Average Assumptions
 
June 30, 2016
Risk-free interest rate
 
1.46
%
Expected term (years)
 
6.00

Volatility
 
80.90
%
Dividend yield
 
2.14
%
Fair value per stock option
 
$
3.41

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. Expected life is determined using a simplified approach, calculated as the midpoint between the vesting period and the contractual life of the award.
The following table summarizes Chemours stock option activity for the six months ended June 30, 2016.
 
Number of Shares
(in thousands)
 
Weighted Average Exercise Price (per share)
 
Weighted Average Remaining Contractual Term (years)
 
Aggregate Intrinsic Value (in thousands)
Outstanding, December 31, 2015
8,284

 
$
14.66

 
4.82
 
$
—

Granted
1,406

 
5.73

 
 
 
 
Exercised
(12
)
 
8.38

 
 
 
 
Forfeited
(252
)
 
15.46

 
 
 
 
Expired
(356
)
 
5.82

 
 
 
 
Outstanding, June 30, 2016
9,070

 
13.60

 
5.28
 
$
3,556

Exercisable, June 30, 2016
4,928

 
13.69

 
3.55
 
$
—

The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value (the difference between the Company's closing stock price on the last trading day of June 30, 2016 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options at quarter end. The amount changes based on the fair market value of the Company's stock. Total intrinsic value of options exercised for the six months ended June 30, 2016 was insignificant.
As of June 30, 2016, $6 of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 1.78 years.

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NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share amounts)

RSUs
During 2016, Chemours granted additional RSUs to key senior 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 upon the market price of the underlying common stock as of the grant date.
Non-vested awards of RSUs, both with and without a performance condition, as of June 30, 2016 are shown below.
 
Number of Shares
(in thousands)
 
Weighted Average
Grant Date
Fair Value
(per share)
Nonvested, December 31, 2015
2,349

 
14.87

Granted
948

 
6.04

Vested
(554
)
 
15.98

Forfeited
(167
)
 
15.82

Nonvested, June 30, 2016
2,576

 
11.40

As of June 30, 2016, there was $21 of unrecognized stock-based compensation expense related to nonvested awards, which is expected to be recognized over a weighted-average period of 1.93 years.
Performance Share Units
During 2016, Chemours issued performance share units (“PSU”) to key senior management employees, which upon vesting, covert 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 200% of the target amount depending on the Company’s performance against the performance goals. During the three and six months ended June 30, 2016, the Company recorded stock-based compensation related to PSUs as a component of selling, general and administrative expense of approximately less than $1. There were no PSUs granted prior to 2016.
The following table provides compensation costs for stock-based compensation related to PSUs.
 
Number of Share Units
(in thousands)
 
Weighted Average
Grant Date
Fair Value
(per share)
Nonvested, December 31, 2015
—

 
$
—

Granted
825

 
6.10

Vested
—

 
—

Forfeited
(22
)
 
6.10

Nonvested, June 30, 2016
803

 
$
6.10

A portion of the fair value of PSUs was estimated at the grant date based on the probability of satisfying the market-based conditions associated with the PSUs using the Monte Carlo valuation method, which assesses probabilities of various outcomes of market conditions. The other portion of the fair value of the PSUs is based on the fair market value of the Company’s stock at the grant date, regardless of whether the market-based condition is satisfied. The per unit weighted-average fair value at the date of grant for PSUs granted during the three and six months ended June 30, 2016 was $6.10. The fair value of each PSU grant is amortized monthly into compensation expense on a straight-line basis over their respective vesting periods over 36 months. The accrual of compensation costs is based on our estimate of the final expected value of the award, and is adjusted as required for the portion based on the performance-based condition. The Company assumes that forfeitures will be minimal, and recognizes forfeitures as they occur, which results in a reduction in compensation expense. As the payout of the PSUs includes dividend equivalents, no separate dividend yield assumption is required in calculating the fair value of the PSUs.

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NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share amounts)

Note 20. Segment Information 
Chemours’ operations are classified into three reportable segments based on similar economic characteristics, the nature of products and production processes, end-use markets, channels of distribution and regulatory environment. Chemours’ reportable segments are Titanium Technologies, Fluoroproducts and Chemical Solutions. Corporate costs and certain legal and environmental expenses that are not aligned with the reportable segments and foreign exchange gains and losses are reflected in Corporate and Other.
Segment 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. Adjusted EBITDA - or Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization, is the primary measure of segment profitability used by the 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 postretirement employee benefit costs, which represent the components of net periodic pension costs (income) excluding service cost component.
•
exchange gains (losses),
•
employee separation, asset-related charges and other charges, net,
•
asset impairments, 
•
gains (losses) on sale of business or assets, and
•
other items not considered indicative of our ongoing operational performance and expected to occur infrequently.
The tables presented below reflect the reclassification of certain corporate costs, certain legal and environmental expenses that are not aligned with our reportable segments, and foreign exchange gains and losses from our reportable segments into Corporate and Other. All periods presented reflect the current definition of Adjusted EBITDA.
Three months ended June 30,
Titanium Technologies
 
Fluoroproducts
 
Chemical Solutions
 
Corporate and Other
 
Total
2016
 

 
 

 
 
 
 
 
 
Net sales to external customers
$
596

 
$
573

 
$
214

 
$
—

 
$
1,383

Adjusted EBITDA
111

 
105

 
11

 
(40
)
 
187

Depreciation and amortization
32

 
25

 
8

 
8

 
73

 
 
 
 
 
 
 
 
 
 
2015
 

 
 

 
 
 
 
 
 
Net sales to external customers
$
642

 
$
588

 
$
278

 
$
—

 
$
1,508

Adjusted EBITDA
91

 
54

 
4

 
(22
)
 
127

Depreciation and amortization
32

 
21

 
14

 
—

 
67

Six months ended June 30,
Titanium Technologies
 
Fluoroproducts
 
Chemical Solutions
 
Corporate and Other
 
Total
2016
 

 
 

 
 
 
 
 
 
Net sales to external customers
$
1,117

 
$
1,104

 
$
459

 
$
—

 
$
2,680