Item 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Note 1. Background, Description of the Business, and Basis of Presentation
The Chemours Company (“Chemours”, or the “Company”) is a leading, global provider of performance chemicals that are key inputs in end-products and processes in a variety of industries. The Company delivers customized solutions with a wide range of industrial and specialty chemical products for markets, including plastics and coatings, refrigeration and air conditioning, general industrial, electronics, mining, and oil refining. The Company’s principal products include refrigerants, industrial fluoropolymer resins, sodium cyanide, performance chemicals and intermediates, and titanium dioxide (“TiO2”) pigment. Chemours manages and reports its operating results through three reportable segments: Fluoroproducts, Chemical Solutions, and Titanium Technologies. The Fluoroproducts segment is a leading, global provider of fluoroproducts, including refrigerants and industrial fluoropolymer resins. The Chemical Solutions segment is a leading, North American provider of industrial chemicals used in gold production, industrial, and consumer applications. The Titanium Technologies segment is a leading, global provider of TiO2 pigment, a premium white pigment used to deliver whiteness, brightness, opacity, and protection in a variety of applications.
Chemours separated from E. I. du Pont de Nemours and Company (“DuPont”) on July 1, 2015 (the “Separation”). On August 31, 2017, DuPont completed a merger with The Dow Chemical Company (“Dow”). Following their merger, DuPont and Dow engaged in a series of reorganization steps and, in 2019, separated into three publicly-traded companies named Dow Inc., DuPont de Nemours, Inc., and Corteva, Inc. (“Corteva”).
Unless the context otherwise requires, references herein to “The Chemours Company”, “Chemours”, “the Company”, “our Company”, “we”, “us”, and “our” refer to The Chemours Company and its consolidated subsidiaries. References to “DuPont” refer to E. I. du Pont de Nemours and Company, which is now a subsidiary of Corteva.
The accompanying interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). In the opinion of management, all adjustments (consisting of normal, recurring adjustments) considered necessary for a fair statement of the Company’s results for interim periods have been included. The notes that follow are an integral part of the Company’s interim consolidated financial statements. The Company’s results for interim periods should not be considered indicative of its results for a full year, and the year-end consolidated balance sheet does not include all of the disclosures required by GAAP. 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, 2019.
Certain prior period amounts have been reclassified to conform to the current period presentation, the effect of which was not material to the Company’s interim consolidated financial statements.
7
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Considerations related to the current novel coronavirus disease (“COVID-19”)
In December 2019, an outbreak of illness caused by COVID-19 was identified in Wuhan, China, and the virus has since continued to spread globally. In March 2020, the World Health Organization declared COVID-19 a global pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. Since the initial stages of the pandemic, certain economies in regions throughout the world have started to reopen; however, certain of these regions have also seen further spread and even resurgences in the number of positively identified infections. Particularly in the Americas and Europe, infections have continued to spread, leading to health-related concerns in regions where the Company has several key manufacturing facilities. In an attempt to minimize the transmission of COVID-19, significant social and economic restrictions have been imposed throughout the U.S. and abroad, including travel bans, quarantines, restrictions on public gatherings, shelter-in-place orders, and/or safer-at-home orders. These restrictions, while necessary and important for public health, have negative business-related implications for the Company and the U.S. and global economies. In consideration of the Company’s global customer base, the rates at which economies across the globe recover or worsen may drive varying levels of end-market demand for the various performance chemicals provided by the Company’s three segments. In turn, the magnitude and duration of the COVID-19 pandemic create significant uncertainties for the Company’s customer demand and financial results and, during the quarter ended September 30, 2020, have caused adverse impacts on the Company’s results of operations.
In response to the macroeconomic uncertainties driven by COVID-19, beginning in the second quarter of 2020, management decided to take certain precautionary measures. On April 8, 2020, the Company drew $300 from its revolving credit facility, which was subsequently repaid during the third quarter of 2020 based on the Company’s liquidity position. Management also elected to accept tax relief provided by various taxing jurisdictions, resulting in the deferral of approximately $80 in tax payments, which are largely expected to be made in the first quarter of 2021. From a cost savings perspective, management implemented a range of actions aimed at reducing costs, inclusive of reducing all discretionary spend, freezing non-critical hiring, delaying external spend wherever possible, reducing structural plant fixed costs, and temporarily reducing base salaries where legally permissible. The temporary base salary reductions were discontinued in September 2020. Management continues to expect that available cash, cash from operations, and existing debt financing arrangements will provide the Company with sufficient liquidity through at least November 2021.
In the preparation of these financial statements and related disclosures, management has assessed the impact of COVID-19 on its results, estimates, assumptions, forecasts, and accounting policies and made additional disclosures, as necessary. As the COVID-19 situation is unprecedented and ever evolving, future events and effects related to the illness cannot be determined with precision, and actual results could significantly differ from estimates or forecasts.
8
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Note 2. Recent Accounting Pronouncements
Accounting Guidance Issued and Not Yet Adopted
Simplifying the Accounting for Income Taxes
In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740, as well as improve consistency of application by clarifying and amending existing guidance. For public entities, the amendments are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, and early adoption is permitted. The Company is currently evaluating the impacts of adopting this guidance on its financial position, results of operations, and cash flows.
Recently Adopted Accounting Guidance
Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU No. 2016-13”). The amendments in this update affect loans, debt securities, trade receivables, and any other financial assets that have the contractual right to receive cash, which, for the Company, primarily consists of accounts and notes receivable, net. ASU No. 2016-13 requires an entity to recognize expected credit losses rather than incurred losses for financial assets. The Company adopted ASU No. 2016-13 on January 1, 2020 using the modified retrospective transition method, the effect of which was not material to its financial position, results of operations, and cash flows.
Facilitation of the Effects of Reference Rate Reform on Financial Reporting
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU No. 2020-04”). The amendments in this update provide optional guidance for a limited period of time to ease the potential burden associated with accounting for contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. ASU No. 2020-04 is effective March 12, 2020 through December 31, 2022. The Company is currently evaluating the impacts this standard will have on its accounting for contracts and hedging relationships.
Note 3. Acquisitions and Divestitures
Acquisition of Southern Ionics Minerals, LLC
In August 2019, the Company, through its wholly-owned subsidiary, The Chemours Company FC, LLC, entered into a Membership Interest Purchase Agreement to acquire all of the outstanding stock of Southern Ionics Minerals, LLC (“SIM”), a privately-held minerals exploration, mining, and manufacturing company headquartered in Jacksonville, Florida. The aggregate purchase price of $25 included an upfront payment of $10, an additional installment payment of $10, and contingent considerations with an estimated fair value of $5. The additional installment payment of $10 was made during the third quarter of 2020.
The Company’s consolidated financial statements include SIM’s results of operations from August 1, 2019, the date of acquisition. Net sales and net income (loss) attributable to Chemours contributed by SIM during this period were not material to the Company’s or its Titanium Technologies segment’s results of operations.
9
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Note 4. Net Sales
Disaggregation of Net Sales
The following table sets forth a disaggregation of the Company’s net sales by geographic region and segment and product group for the three and nine months ended September 30, 2020 and 2019.
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Net sales by geographic region (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fluoroproducts
|
|
$
|
233
|
|
|
$
|
260
|
|
|
$
|
727
|
|
|
$
|
851
|
|
Chemical Solutions
|
|
|
52
|
|
|
|
87
|
|
|
|
158
|
|
|
|
246
|
|
Titanium Technologies
|
|
|
203
|
|
|
|
178
|
|
|
|
571
|
|
|
|
550
|
|
Total North America
|
|
|
488
|
|
|
|
525
|
|
|
|
1,456
|
|
|
|
1,647
|
|
Asia Pacific:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fluoroproducts
|
|
|
142
|
|
|
|
173
|
|
|
|
428
|
|
|
|
511
|
|
Chemical Solutions
|
|
|
4
|
|
|
|
16
|
|
|
|
17
|
|
|
|
47
|
|
Titanium Technologies
|
|
|
185
|
|
|
|
225
|
|
|
|
539
|
|
|
|
587
|
|
Total Asia Pacific
|
|
|
331
|
|
|
|
414
|
|
|
|
984
|
|
|
|
1,145
|
|
Europe, the Middle East, and Africa:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fluoroproducts
|
|
|
117
|
|
|
|
151
|
|
|
|
387
|
|
|
|
515
|
|
Chemical Solutions
|
|
|
6
|
|
|
|
6
|
|
|
|
17
|
|
|
|
15
|
|
Titanium Technologies
|
|
|
135
|
|
|
|
122
|
|
|
|
382
|
|
|
|
358
|
|
Total Europe, the Middle East, and Africa
|
|
|
258
|
|
|
|
279
|
|
|
|
786
|
|
|
|
888
|
|
Latin America (2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fluoroproducts
|
|
|
41
|
|
|
|
52
|
|
|
|
115
|
|
|
|
157
|
|
Chemical Solutions
|
|
|
26
|
|
|
|
31
|
|
|
|
71
|
|
|
|
96
|
|
Titanium Technologies
|
|
|
89
|
|
|
|
89
|
|
|
|
219
|
|
|
|
240
|
|
Total Latin America
|
|
|
156
|
|
|
|
172
|
|
|
|
405
|
|
|
|
493
|
|
Total net sales
|
|
$
|
1,233
|
|
|
$
|
1,390
|
|
|
$
|
3,631
|
|
|
$
|
4,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales by segment and product group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fluoroproducts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fluorochemicals
|
|
$
|
293
|
|
|
$
|
304
|
|
|
$
|
832
|
|
|
$
|
1,028
|
|
Fluoropolymers
|
|
|
240
|
|
|
|
332
|
|
|
|
825
|
|
|
|
1,006
|
|
Chemical Solutions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mining solutions
|
|
|
53
|
|
|
|
70
|
|
|
|
150
|
|
|
|
200
|
|
Performance chemicals and intermediates
|
|
|
35
|
|
|
|
70
|
|
|
|
113
|
|
|
|
204
|
|
Titanium Technologies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Titanium dioxide and other minerals
|
|
|
612
|
|
|
|
614
|
|
|
|
1,711
|
|
|
|
1,735
|
|
Total net sales
|
|
$
|
1,233
|
|
|
$
|
1,390
|
|
|
$
|
3,631
|
|
|
$
|
4,173
|
|
|
(1)
|
Net sales are attributed to countries based on customer location.
|
|
(2)
|
Latin America includes Mexico.
|
Substantially all of the Company’s net sales are derived from goods and services transferred at a point in time.
10
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Contract Balances
The Company’s assets and liabilities from contracts with customers constitute accounts receivable - trade, deferred revenue, and customer rebates. An amount for accounts receivable - trade is recorded when the right to consideration under a contract becomes unconditional. An amount for deferred revenue is recorded when consideration is received prior to the conclusion that a contract exists, or when a customer transfers consideration prior to the Company satisfying its performance obligations under a contract. Customer rebates represent an expected refund liability to a customer based on a contract. In contracts with customers where a rebate is offered, it is generally applied retroactively based on the achievement of a certain sales threshold. As revenue is recognized, the Company estimates whether or not the sales threshold will be achieved to determine the amount of variable consideration to include in the transaction price.
The following table sets forth the Company’s contract balances from contracts with customers at September 30, 2020 and December 31, 2019.
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Accounts receivable - trade, net (1)
|
|
$
|
523
|
|
|
$
|
602
|
|
Deferred revenue
|
|
|
14
|
|
|
|
15
|
|
Customer rebates
|
|
|
60
|
|
|
|
72
|
|
|
(1)
|
Accounts receivable - trade, net includes trade notes receivable of $1 and less than $1 and is net of allowances for doubtful accounts of $6 and $5 at September 30, 2020 and December 31, 2019, respectively. Such allowances are equal to the estimated uncollectible amounts.
|
Changes in the Company’s deferred revenue balances resulting from additions for advance payments and deductions for amounts recognized in net sales during the three and nine months ended September 30, 2020 were not significant. For the three and nine months ended September 30, 2020, the amount of net sales recognized from performance obligations satisfied in prior periods (e.g., due to changes in transaction price) was not significant.
Contract asset balances or capitalized costs associated with obtaining or fulfilling customer contracts were not significant as of September 30, 2020 or December 31, 2019.
Remaining Performance Obligations
Certain of the Company’s master services agreements or other arrangements contain take-or-pay clauses, whereby customers are required to purchase a fixed minimum quantity of product during a specified period, or pay the Company for such orders, even if not requested by the customer. The Company considers these take-or-pay clauses to be an enforceable contract, and as such, the legally-enforceable minimum amounts under such an arrangement are considered to be outstanding performance obligations on contracts with an original expected duration greater than one year. At September 30, 2020, Chemours had $47 of remaining performance obligations. The Company expects to recognize approximately 47% of its remaining performance obligations as revenue in 2020, an approximate additional 28% in 2021, and the balance thereafter. The Company applies the allowable practical expedient and does not include remaining performance obligations that have original expected durations of one year or less, or amounts for variable consideration allocated to wholly-unsatisfied performance obligations or wholly-unsatisfied distinct goods that form part of a single performance obligation, if any. Amounts for contract renewals that are not yet exercised by September 30, 2020 are also excluded.
11
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Note 5. Restructuring, Asset-related, and Other Charges
The following table sets forth the components of the Company’s restructuring, asset-related, and other charges for the three and nine months ended September 30, 2020 and 2019.
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Restructuring and other charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee separation charges
|
|
$
|
3
|
|
|
$
|
17
|
|
|
$
|
18
|
|
|
$
|
15
|
|
Decommissioning and other charges
|
|
|
1
|
|
|
|
5
|
|
|
|
3
|
|
|
|
22
|
|
Total restructuring and other charges
|
|
|
4
|
|
|
|
22
|
|
|
|
21
|
|
|
|
37
|
|
Asset-related charges
|
|
|
5
|
|
|
|
12
|
|
|
|
16
|
|
|
|
12
|
|
Total restructuring, asset-related, and other charges
|
|
$
|
9
|
|
|
$
|
34
|
|
|
$
|
37
|
|
|
$
|
49
|
|
The following table sets forth the impacts of the Company’s restructuring programs to segment earnings for the three and nine months ended September 30, 2020 and 2019.
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Restructuring and other charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant and product line closures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemical Solutions
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
—
|
|
Corporate and Other
|
|
|
—
|
|
|
|
5
|
|
|
|
1
|
|
|
|
18
|
|
Total plant and product line closures
|
|
|
1
|
|
|
|
5
|
|
|
|
5
|
|
|
|
18
|
|
2017 Restructuring Program:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fluoroproducts
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
2
|
|
Titanium Technologies
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
Corporate and Other
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
Total 2017 Restructuring Program
|
|
|
—
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
3
|
|
2018 Restructuring Program:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and Other
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
Total 2018 Restructuring Program
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
2019 Restructuring Program:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fluoroproducts
|
|
|
—
|
|
|
|
7
|
|
|
|
3
|
|
|
|
7
|
|
Chemical Solutions
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
|
|
2
|
|
Titanium Technologies
|
|
|
—
|
|
|
|
5
|
|
|
|
—
|
|
|
|
5
|
|
Corporate and Other
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
3
|
|
Total 2019 Restructuring Program
|
|
|
—
|
|
|
|
17
|
|
|
|
3
|
|
|
|
17
|
|
2020 Restructuring Program:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fluoroproducts
|
|
|
1
|
|
|
|
—
|
|
|
|
4
|
|
|
|
—
|
|
Chemical Solutions
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
Titanium Technologies
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
Corporate and Other
|
|
|
2
|
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
Total 2020 Restructuring Program
|
|
|
3
|
|
|
|
—
|
|
|
|
14
|
|
|
|
—
|
|
Total restructuring and other charges
|
|
|
4
|
|
|
|
22
|
|
|
|
21
|
|
|
|
37
|
|
Asset-related charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fluoroproducts
|
|
|
5
|
|
|
|
—
|
|
|
|
5
|
|
|
|
—
|
|
Chemical Solutions
|
|
|
—
|
|
|
|
12
|
|
|
|
7
|
|
|
|
12
|
|
Corporate and Other
|
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
|
|
—
|
|
Total asset-related charges
|
|
|
5
|
|
|
|
12
|
|
|
|
16
|
|
|
|
12
|
|
Total restructuring, asset-related, and other charges
|
|
$
|
9
|
|
|
$
|
34
|
|
|
$
|
37
|
|
|
$
|
49
|
|
12
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Plant and Product Line Closures and Asset-related Charges
In the fourth quarter of 2015, the Company announced its completion of the strategic review of its Reactive Metals Solutions business and the decision to stop production at its Niagara Falls, New York manufacturing plant. The Company recorded additional decommissioning and dismantling-related charges of $1 and $2 for the three and nine months ended September 30, 2020, respectively, and less than $1 and $1 for the three and nine months ended September 30, 2019, respectively. The Company expects to incur and spend approximately $4 related to additional restructuring charges for similar activities through 2021, all of which relate to Chemical Solutions. As of September 30, 2020, the Company has incurred, in the aggregate, $40 in restructuring charges related to these activities, excluding asset-related charges.
In the first quarter of 2018, the Company began a project to demolish and remove several dormant, unused buildings at its Chambers Works site in Deepwater, New Jersey, which were assigned to Chemours in connection with its Separation from DuPont and never used in Chemours’ operations. The Company recorded additional decommissioning and dismantling-related charges of $1 for the nine months ended September 30, 2020, and $4 and $18 for the three and nine months ended September 30, 2019, respectively. As of September 30, 2020, the Company has incurred, in the aggregate, $28 in restructuring charges related to these activities, all of which relate to Corporate and Other. The Company does not currently expect to incur additional charges related to these activities at its Chambers Works site through the end of 2021, and any remaining future charges and cash outflows associated with these activities are not expected to be material.
In the third quarter of 2019, in an effort to improve the profitability of the Company’s Chemical Solutions segment, the Company announced plans to exit its Methylamines and Methylamides business at its Belle, West Virginia manufacturing plant, which culminated in the completed exit and sale of the business in the fourth quarter of 2019. For the three and nine months ended September 30, 2019, the Company recorded accelerated depreciation of $12. Through the fourth quarter of 2019, the Company incurred, in the aggregate, $34 in restructuring charges related to these activities, all of which relate to Chemical Solutions.
In the second quarter of 2020, the Company completed a business review of its Aniline business. It was determined that the Aniline business is not core to the Company’s future strategy, and the decision was made to stop production at the Pascagoula, Mississippi manufacturing plant by the end of 2020. As a result, during the nine months ended September 30, 2020, the Company recorded asset-related charges of $10, which are primarily comprised of $6 for property, plant, and equipment and other asset impairments, as well as $4 for environmental remediation liabilities to be paid over a period of approximately 16 years. The Company also recorded employee separation-related liabilities of $2. In conjunction with this decision, approximately 75 employees will separate from the Company in 2021 and will be subject to our customary involuntary termination benefits. The associated severance payments will also be made in 2021. The Company expects to incur approximately $9 in additional restructuring charges related to decommissioning, dismantling, and other costs in connection with the exit of its Pascagoula site by the end of 2021, all of which relate to Chemical Solutions. The future net cash outflows associated with these exit costs are not expected to be material.
In the third quarter of 2020, in connection with various property, plant, and equipment and other asset impairments, the Company recorded asset-related charges of $5, all of which relate to Fluoroproducts.
13
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
2017 Restructuring Program
In 2017, the Company announced certain restructuring activities designed to further the cost savings and productivity improvements outlined under management’s transformation plan. These activities include, among other efforts: (i) outsourcing and further centralizing certain business process activities; (ii) consolidating existing, outsourced third-party information technology (“IT”) providers; and, (iii) implementing various upgrades to the Company’s current IT infrastructure. In connection with these corporate function efforts, the Company recorded $1 and $3 in restructuring-related charges for the three and nine months ended September 30, 2019, respectively.
In 2017, the Company also announced a voluntary separation program (“VSP”) for certain eligible U.S. employees in an effort to better manage the anticipated future changes to its workforce. Employees who volunteered for and were accepted under the VSP received certain financial incentives above the Company’s customary involuntary termination benefits to end their employment with Chemours after providing a mutually agreed-upon service period. Approximately 300 employees separated from the Company through the end of 2018. An accrual representing the majority of these termination benefits, amounting to $18, was recognized in the fourth quarter of 2017. The remaining $9 of incremental, one-time financial incentives under the VSP were recognized over the period that each participating employee continued to provide service to Chemours.
The Company recorded charges for its 2017 Restructuring Program of $1 and $3 for the three and nine months ended September 30, 2019, respectively. The cumulative amount incurred, in the aggregate, for the Company’s 2017 Restructuring Program amounted to $61 at September 30, 2020. The Company has substantially completed all actions related to this program.
2018 Restructuring Program
In the fourth quarter of 2018, management initiated a restructuring program of the Company’s corporate functions and recorded the related estimated severance costs of $5. The Company has substantially completed all actions related to this program.
2019 Restructuring Program
In the third quarter of 2019, management initiated a severance program of the Company’s corporate functions and businesses, and the majority of employees separated from the Company during the fourth quarter of 2019. As of September 30, 2020, the cumulative amount incurred, in the aggregate, for the Company’s 2019 Restructuring Program amounted to $25, the majority of which was incurred in the third and fourth quarters of 2019. The Company has completed incurring severance costs for this program. At September 30, 2020 and December 31, 2019, $2 and $14 remained as an employee separation-related liability, respectively, and the remaining severance payments are expected to be made by the end of 2021.
2020 Restructuring Program
In the first quarter of 2020, management initiated the first phase of a severance program that was largely attributable to further aligning the cost structure of the Company’s businesses and corporate functions with its strategic and financial objectives. A second phase of this program was initiated in the third quarter of 2020. As of September 30, 2020, the cumulative amount incurred, in the aggregate, for the Company’s 2020 Restructuring Program amounted to $14. The Company has largely completed incurring severance costs for this program. At September 30, 2020, $7 remained as an employee separation-related liability, and the remaining severance payments are expected to be made by the end of 2021.
The following table sets forth the change in the Company’s employee separation-related liabilities associated with its restructuring programs for the nine months ended September 30, 2020.
|
|
Chemical Solutions
Site Closures
|
|
|
2017
Restructuring
Program
|
|
|
2019
Restructuring
Program
|
|
|
2020
Restructuring
Program
|
|
|
Total
|
|
Balance at December 31, 2019
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
14
|
|
|
$
|
—
|
|
|
$
|
15
|
|
Charges (credits) to income
|
|
|
2
|
|
|
|
(1
|
)
|
|
|
3
|
|
|
|
14
|
|
|
|
18
|
|
Payments
|
|
|
—
|
|
|
|
—
|
|
|
|
(15
|
)
|
|
|
(7
|
)
|
|
|
(22
|
)
|
Balance at September 30, 2020
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
7
|
|
|
$
|
11
|
|
At September 30, 2020, there were no significant outstanding liabilities related to the Company’s decommissioning and other restructuring-related charges.
14
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Note 6. Other Income (Expense), Net
The following table sets forth the components of the Company’s other income (expense), net for the three and nine months ended September 30, 2020 and 2019.
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Leasing, contract services, and miscellaneous income (1)
|
|
$
|
2
|
|
|
$
|
6
|
|
|
$
|
11
|
|
|
$
|
47
|
|
Royalty income (2)
|
|
|
1
|
|
|
|
6
|
|
|
|
9
|
|
|
|
16
|
|
Gain on sales of assets and businesses (3)
|
|
|
—
|
|
|
|
9
|
|
|
|
—
|
|
|
|
11
|
|
Exchange (losses) gains, net (4)
|
|
|
(9
|
)
|
|
|
5
|
|
|
|
(28
|
)
|
|
|
2
|
|
Non-operating pension and other post-retirement employee benefit income (cost) (5)
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
2
|
|
|
|
5
|
|
Total other (expense) income, net
|
|
$
|
(5
|
)
|
|
$
|
25
|
|
|
$
|
(6
|
)
|
|
$
|
81
|
|
|
(1)
|
Leasing, contract services, and miscellaneous income includes European Union fluorinated greenhouse gas quota authorization sales of $1 and $3 for the three and nine months ended September 30, 2020, respectively, and $2 and $38 for the three and nine months ended September 30, 2019, respectively.
|
|
(2)
|
Royalty income for the periods ended September 30, 2020 and 2019 is primarily from technology licensing.
|
|
(3)
|
Gain on sales of assets and businesses for the three and nine months ended September 30, 2019 includes a non-cash gain of $9 recognized in connection with the Company’s sale of its Repauno, New Jersey site.
|
|
(4)
|
Exchange (losses) gains, net includes gains and losses on the Company’s foreign currency forward contracts that have not been designated as a cash flow hedge.
|
|
(5)
|
Non-operating pension and other post-retirement employee benefit income (cost) represents the components of net periodic pension income (cost), excluding the service cost component.
|
Note 7. Income Taxes
During the first quarter of 2020, the Company recorded a one-time tax benefit of $18, which was related to the United States Internal Revenue Service acceptance of a non-automatic accounting method change that allows for the recovery of tax basis for depreciation, which had been previously disallowed. The balance sheet impact of this adjustment is reflected as a deferred tax asset on the consolidated balance sheet.
During the third quarter of 2020, the Company recorded an income tax benefit of $11, net, which was related to the filing of its 2019 U.S. federal income tax return. The tax return included the favorable impacts of certain elections and accounting method changes, which were not reflected in the Company’s benefit from income taxes for the year ended December 31, 2019 as they were not yet able to be quantified.
In the United States, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was passed on March 27, 2020. This legislative relief, as well as other government relief programs, include measures that could impact direct and indirect tax provisions. Management has analyzed the relief in jurisdictions in which the Company operates, and the applicable impacts, which are not material to the Company’s benefit from income taxes for the three and nine months ended September 30, 2020.
During the third quarter of 2020, the U.S. Treasury Department released final and proposed regulations which impact U.S. business interest expense limitations, foreign income inclusion, and foreign tax credits. These regulations will be effective for tax years 2020 or 2021 forward, with the option of applying to tax years 2018 – 2020. The Company has assessed the impact of these regulations, the effect of which is not material to any of its historical or current tax positions.
15
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Note 8. Earnings Per Share of Common Stock
The following table sets forth the reconciliations of the numerators and denominators for the Company’s basic and diluted earnings per share (“EPS”) calculations for the three and nine months ended September 30, 2020 and 2019.
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Chemours
|
|
$
|
76
|
|
|
$
|
76
|
|
|
$
|
200
|
|
|
$
|
265
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares
outstanding - basic
|
|
|
164,762,621
|
|
|
|
163,815,483
|
|
|
|
164,556,139
|
|
|
|
165,254,084
|
|
Dilutive effect of the Company’s employee
compensation plans
|
|
|
1,851,050
|
|
|
|
1,325,380
|
|
|
|
1,209,143
|
|
|
|
2,780,874
|
|
Weighted-average number of common shares
outstanding - diluted
|
|
|
166,613,671
|
|
|
|
165,140,863
|
|
|
|
165,765,282
|
|
|
|
168,034,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share of common stock
|
|
$
|
0.46
|
|
|
$
|
0.46
|
|
|
$
|
1.22
|
|
|
$
|
1.60
|
|
Diluted earnings per share of common stock
|
|
|
0.46
|
|
|
|
0.46
|
|
|
|
1.21
|
|
|
|
1.58
|
|
The following table sets forth the average number of stock options that were anti-dilutive and, therefore, were not included in the Company’s diluted EPS calculations for the three and nine months ended September 30, 2020 and 2019.
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Average number of stock options
|
|
|
1,676,765
|
|
|
|
3,195,601
|
|
|
|
4,607,057
|
|
|
|
1,893,011
|
|
Note 9. Accounts and Notes Receivable, Net
The following table sets forth the components of the Company’s accounts and notes receivable, net at September 30, 2020 and December 31, 2019.
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Accounts receivable - trade, net (1,2)
|
|
$
|
523
|
|
|
$
|
602
|
|
VAT, GST, and other taxes (3)
|
|
|
43
|
|
|
|
59
|
|
Other receivables (4)
|
|
|
6
|
|
|
|
13
|
|
Total accounts and notes receivable, net
|
|
$
|
572
|
|
|
$
|
674
|
|
|
(1)
|
Accounts receivable - trade, net includes trade notes receivable of $1 and less than $1 and is net of allowances for doubtful accounts of $6 and $5 at September 30, 2020 and December 31, 2019, respectively. Such allowances are equal to the estimated uncollectible amounts.
|
|
(2)
|
On January 1, 2020, the Company adopted ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, the effect of which was not material to its accounts receivable - trade or its allowance for doubtful accounts. See “Note 2 – Recent Accounting Pronouncements” for further details.
|
|
(3)
|
Value added tax (“VAT”) and goods and services tax (“GST”) for various jurisdictions.
|
|
(4)
|
Other receivables consist of derivative instruments, advances, and other deposits.
|
Accounts and notes receivable are carried at amounts that approximate fair value. Bad debt expense amounted to $2 for the three and nine months ended September 30, 2020, and less than $1 and $1 for the three and nine months ended September 30, 2019, respectively.
16
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Note 10. Inventories
The following table sets forth the components of the Company’s inventories at September 30, 2020 and December 31, 2019.
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Finished products
|
|
$
|
625
|
|
|
$
|
589
|
|
Semi-finished products
|
|
|
175
|
|
|
|
189
|
|
Raw materials, stores, and supplies
|
|
|
462
|
|
|
|
559
|
|
Inventories before LIFO adjustment
|
|
|
1,262
|
|
|
|
1,337
|
|
Less: Adjustment of inventories to LIFO basis
|
|
|
(269
|
)
|
|
|
(258
|
)
|
Total inventories
|
|
$
|
993
|
|
|
$
|
1,079
|
|
Inventory values, before last-in, first-out (“LIFO”) adjustment are generally determined by the average cost method, which approximates current cost. Inventories are valued under the LIFO method at substantially all of the Company’s U.S. locations, which comprised $639 and $674 (or 51% and 50%, respectively) of inventories before the LIFO adjustments at September 30, 2020 and December 31, 2019, respectively. The remainder of the Company’s inventory held in international locations and certain U.S. locations is valued under the average cost method.
Note 11. Property, Plant, and Equipment, Net
The following table sets forth the components of the Company’s property, plant, and equipment, net at September 30, 2020 and December 31, 2019.
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Equipment
|
|
$
|
7,678
|
|
|
$
|
7,600
|
|
Buildings
|
|
|
1,155
|
|
|
|
1,174
|
|
Construction-in-progress
|
|
|
415
|
|
|
|
493
|
|
Land
|
|
|
107
|
|
|
|
110
|
|
Mineral rights
|
|
|
36
|
|
|
|
36
|
|
Property, plant, and equipment
|
|
|
9,391
|
|
|
|
9,413
|
|
Less: Accumulated depreciation
|
|
|
(5,973
|
)
|
|
|
(5,854
|
)
|
Total property, plant, and equipment, net
|
|
$
|
3,418
|
|
|
$
|
3,559
|
|
Property, plant, and equipment, net included gross assets under finance leases of $75 and $68 at September 30, 2020 and December 31, 2019, respectively.
Depreciation expense amounted to $77 and $234 for the three and nine months ended September 30, 2020, respectively, and $76 and $226 for the three and nine months ended September 30, 2019, respectively.
Note 12. Investments in Affiliates
The Company engages in transactions with its equity method investees in the ordinary course of business. Net sales to the Company’s equity method investees amounted to $21 and $68 for the three and nine months ended September 30, 2020, respectively, and $40 and $104 for the three and nine months ended September 30, 2019, respectively. Purchases from the Company’s equity method investees amounted to $38 and $107 for the three and nine months ended September 30, 2020, respectively, and $48 and $215 for the three and nine months ended September 30, 2019, respectively. The Company also received less than $1 and $4 in dividends from its equity method investees for the three and nine months ended September 30, 2020, respectively, and $1 and $4 for the three and nine months ended September 30, 2019, respectively.
17
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Note 13. Other Assets
The following table sets forth the components of the Company’s other assets at September 30, 2020 and December 31, 2019.
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Capitalized repair and maintenance costs
|
|
$
|
123
|
|
|
$
|
148
|
|
Pension assets (1)
|
|
|
73
|
|
|
|
59
|
|
Deferred income taxes
|
|
|
66
|
|
|
|
40
|
|
Miscellaneous
|
|
|
48
|
|
|
|
45
|
|
Total other assets
|
|
$
|
310
|
|
|
$
|
292
|
|
|
(1)
|
Pension assets represents the funded status of certain of the Company's long-term employee benefit plans.
|
Note 14. Other Accrued Liabilities
The following table sets forth the components of the Company’s other accrued liabilities at September 30, 2020 and December 31, 2019.
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Compensation and other employee-related costs
|
|
$
|
71
|
|
|
$
|
52
|
|
Employee separation costs (1)
|
|
|
11
|
|
|
|
15
|
|
Accrued litigation (2)
|
|
|
8
|
|
|
|
10
|
|
Environmental remediation (2)
|
|
|
97
|
|
|
|
74
|
|
Asset retirement obligations (3)
|
|
|
13
|
|
|
|
7
|
|
Income taxes
|
|
|
98
|
|
|
|
65
|
|
Customer rebates
|
|
|
60
|
|
|
|
72
|
|
Deferred revenue
|
|
|
9
|
|
|
|
7
|
|
Accrued interest
|
|
|
61
|
|
|
|
21
|
|
Operating lease liabilities
|
|
|
67
|
|
|
|
66
|
|
Miscellaneous (4)
|
|
|
80
|
|
|
|
95
|
|
Total other accrued liabilities
|
|
$
|
575
|
|
|
$
|
484
|
|
|
(1)
|
Represents the current portion of accrued employee separation costs related to the Company’s restructuring activities, which are discussed further in “Note 5 – Restructuring, Asset-related, and Other Charges”.
|
|
(2)
|
Represents the current portions of accrued litigation and environmental remediation, which are discussed further in “Note 17 – Commitments and Contingent Liabilities”.
|
|
(3)
|
Represents the current portion of asset retirement obligations, which are discussed further in “Note 16 – Other Liabilities”.
|
|
(4)
|
Miscellaneous primarily includes accrued utility expenses, property taxes, an accrued indemnification liability, derivative instruments, and other miscellaneous expenses.
|
18
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Note 15. Debt
The following table sets forth the components of the Company’s debt at September 30, 2020 and December 31, 2019.
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Senior secured term loans:
|
|
|
|
|
|
|
|
|
Tranche B-2 U.S. dollar term loan due April 2025
|
|
$
|
878
|
|
|
$
|
884
|
|
Tranche B-2 euro term loan due April 2025
(€341 at September 30, 2020 and €344 at December 31, 2019)
|
|
|
397
|
|
|
|
383
|
|
Senior unsecured notes:
|
|
|
|
|
|
|
|
|
6.625% due May 2023
|
|
|
908
|
|
|
|
908
|
|
7.000% due May 2025
|
|
|
750
|
|
|
|
750
|
|
4.000% due May 2026
(€450 at September 30, 2020 and December 31, 2019)
|
|
|
524
|
|
|
|
501
|
|
5.375% due May 2027
|
|
|
500
|
|
|
|
500
|
|
Securitization Facility
|
|
|
—
|
|
|
|
110
|
|
Finance lease liabilities
|
|
|
63
|
|
|
|
59
|
|
Financing obligation (1)
|
|
|
94
|
|
|
|
95
|
|
Other
|
|
|
13
|
|
|
|
6
|
|
Total debt
|
|
|
4,127
|
|
|
|
4,196
|
|
Less: Unamortized issue discounts
|
|
|
(7
|
)
|
|
|
(8
|
)
|
Less: Unamortized debt issuance costs
|
|
|
(25
|
)
|
|
|
(28
|
)
|
Less: Short-term and current maturities of long-term debt
|
|
|
(32
|
)
|
|
|
(134
|
)
|
Total long-term debt, net
|
|
$
|
4,063
|
|
|
$
|
4,026
|
|
|
(1)
|
At September 30, 2020 and December 31, 2019, financing obligation includes $94 and $95, respectively, in connection with the financed portion of the Company’s research and development facility on the Science, Technology, and Advanced Research Campus of the University of Delaware in Newark, Delaware (“Chemours Discovery Hub”).
|
Senior Secured Credit Facilities
The Company’s credit agreement, as amended and restated on April 3, 2018 (“Credit Agreement”), provides for seven-year, senior secured term loans and a five-year, $800 senior secured revolving credit facility (“Revolving Credit Facility”) (collectively, the “Senior Secured Credit Facilities”). The Company made term loan payments of $3 and $10 for the three and nine months ended September 30, 2020 and 2019, respectively. On April 8, 2020, as a precautionary measure in light of macroeconomic uncertainties driven by COVID-19, the Company drew $300 from its Revolving Credit Facility. During the third quarter of 2020, based on the Company’s liquidity position, the Company repaid $200 and $100 of the outstanding borrowings on August 28, 2020 and September 17, 2020, respectively. During the third quarter of 2019, the Company repaid $150 of outstanding borrowings under its Revolving Credit Facility, which was drawn during the second quarter of 2019 for general corporate purposes. No borrowings were outstanding under the Revolving Credit Facility at September 30, 2020 and December 31, 2019. Chemours also had $98 and $103 in letters of credit issued and outstanding under the Revolving Credit Facility at September 30, 2020 and December 31, 2019, respectively. At September 30, 2020, the effective interest rates on the class of term loans denominated in U.S. dollars and the class of term loans denominated in euros were 1.9% and 2.5%, respectively. Also, at September 30, 2020, commitment fees on the Revolving Credit Facility were assessed at a rate of 0.20% per annum.
19
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Accounts Receivable Securitization Facility
On March 9, 2020, the Company, through a wholly-owned special purpose entity (“SPE”), entered into an amended and restated receivables purchase agreement (the “Amended Purchase Agreement”) under its accounts receivable securitization facility (“Securitization Facility”). The Amended Purchase Agreement amends and restates, in its entirety, the receivables purchase agreement dated as of July 12, 2019 (the “Original Purchase Agreement”). The Amended Purchase Agreement, among other things, extends the term of the Original Purchase Agreement such that the SPE may sell certain receivables and request investments and letters of credit until the earlier of March 5, 2021 or a termination event, and contains customary representations and warranties, as well as affirmative and negative covenants.
Pursuant to the Original Purchase Agreement, certain of the Company’s subsidiaries sold their accounts receivable to the SPE. In turn, the SPE transferred undivided ownership interests in such receivables to the bank in exchange for cash. However, as the SPE maintained effective control over the accounts receivable under the Original Purchase Agreement, the transfers of the ownership interests to the bank did not meet the criteria to account for the transfers as true sales. As a result, the Company accounted for the transfers as collateralized borrowings.
Pursuant to the Amended Purchase Agreement, the Company no longer maintains effective control over the transferred receivables, and therefore accounts for these transfers as sales of receivables. As a result, on March 9, 2020, the Company repurchased the then-outstanding receivables under the Securitization Facility through repayment of the secured borrowings under the Original Purchase Agreement, resulting in net repayments of $110 for the three months ended March 31, 2020, and sold $125 of its receivables to the bank. These sales were transacted at 100% of the face value of the relevant receivables, resulting in derecognition of the receivables from the Company’s consolidated balance sheets. Cash received from collections of sold receivables is used to fund additional purchases of receivables at 100% of face value on a revolving basis, not to exceed $125, which is the aggregate purchase limit. For the three and nine months ended September 30, 2020, the Company received $289 and $646, respectively, of cash collections on receivables sold under the Amended Purchase Agreement, following which it sold and derecognized $292 and $646, respectively, of incremental accounts receivable. The Company maintains continuing involvement as it acts as the servicer for the sold receivables and guarantees payment to the bank. As collateral against the sold receivables, the SPE maintains a certain level of unsold receivables, which amounted to $70 at September 30, 2020. During the three and nine months ended September 30, 2020, the Company incurred less than $1 and $1, respectively, of servicing and other fees associated with the Securitization Facility. Costs associated with the sales of receivables are reflected in the Company’s consolidated statements of operations for the periods in which the sales occur.
Other
During the third quarter of 2020, the Company entered into a financing arrangement, by which an external financing company funded certain of the Company’s annual insurance premiums for $15. During the three months ended September 30, 2020, the Company made payments of $2, and the remaining $13 is to be paid within the next twelve months. During the third quarter of 2019, the Company entered into a similar financing arrangement for $11, of which $6 remained outstanding at December 31, 2019. The Company repaid all remaining borrowings under its 2019 financing arrangement by June 30, 2020.
20
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Maturities
The Company has required quarterly principal payments related to its senior secured term loans equivalent to 1.00% per annum through December 2024, with the balance due at maturity. Also, following the end of each fiscal year commencing on the year ended December 31, 2019, on an annual basis, the Company is required to make additional principal payments depending on leverage levels, as defined in the Credit Agreement. The Company is not required to make additional principal payments in 2020.
The following table sets forth the Company’s contractual senior debt principal maturities for the next five years and thereafter.
Remainder of 2020
|
|
$
|
3
|
|
2021
|
|
|
13
|
|
2022
|
|
|
13
|
|
2023
|
|
|
921
|
|
2024
|
|
|
13
|
|
Thereafter
|
|
|
2,994
|
|
Total principal maturities on debt
|
|
$
|
3,957
|
|
The Company’s senior secured terms loans due April 2025 are subject to a springing maturity in the event that its 6.625% senior unsecured notes due May 2023 are not redeemed, repaid, modified, and/or refinanced within the 91-day period prior to their maturity date.
Debt Fair Value
The following table sets forth the estimated fair values of the Company’s senior debt issues, which are based on quotes received from third-party brokers, and are classified as Level 2 financial instruments in the fair value hierarchy. The carrying value of borrowings under the Securitization Facility approximate fair value based on the facility’s short-term nature and maturity.
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
Senior secured term loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tranche B-2 U.S. dollar term loan due April 2025
|
|
$
|
878
|
|
|
$
|
850
|
|
|
$
|
884
|
|
|
$
|
865
|
|
Tranche B-2 euro term loan due April 2025
(€341 at September 30, 2020 and €344 at December 31, 2019)
|
|
|
397
|
|
|
|
385
|
|
|
|
383
|
|
|
|
378
|
|
Senior unsecured notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.625% due May 2023
|
|
|
908
|
|
|
|
921
|
|
|
|
908
|
|
|
|
917
|
|
7.000% due May 2025
|
|
|
750
|
|
|
|
761
|
|
|
|
750
|
|
|
|
755
|
|
4.000% due May 2026
(€450 at September 30, 2020 and December 31, 2019)
|
|
|
524
|
|
|
|
503
|
|
|
|
501
|
|
|
|
455
|
|
5.375% due May 2027
|
|
|
500
|
|
|
|
499
|
|
|
|
500
|
|
|
|
450
|
|
Securitization Facility
|
|
|
—
|
|
|
|
—
|
|
|
|
110
|
|
|
|
110
|
|
Total senior debt
|
|
|
3,957
|
|
|
$
|
3,919
|
|
|
|
4,036
|
|
|
$
|
3,930
|
|
Less: Unamortized issue discounts
|
|
|
(7
|
)
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
Less: Unamortized debt issuance costs
|
|
|
(25
|
)
|
|
|
|
|
|
|
(28
|
)
|
|
|
|
|
Total senior debt, net
|
|
$
|
3,925
|
|
|
|
|
|
|
$
|
4,000
|
|
|
|
|
|
21
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Note 16. Other Liabilities
The following table sets forth the components of the Company’s other liabilities at September 30, 2020 and December 31, 2019.
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Employee-related costs (1)
|
|
$
|
107
|
|
|
$
|
113
|
|
Accrued litigation (2)
|
|
|
51
|
|
|
|
50
|
|
Environmental remediation (2)
|
|
|
301
|
|
|
|
332
|
|
Asset retirement obligations (3)
|
|
|
59
|
|
|
|
69
|
|
Deferred revenue
|
|
|
5
|
|
|
|
8
|
|
Miscellaneous (4)
|
|
|
73
|
|
|
|
61
|
|
Total other liabilities
|
|
$
|
596
|
|
|
$
|
633
|
|
|
(1)
|
Employee-related costs primarily represents liabilities associated with the Company’s long-term employee benefit plans.
|
|
(2)
|
Represents the long-term portions of accrued litigation and environmental remediation, which are discussed further in “Note 17 – Commitments and Contingent Liabilities”.
|
|
(3)
|
Represents the long-term portion of asset retirement obligations, which totaled $72 and $76 when combined with the current portion at September 30, 2020 and December 31, 2019, respectively, as disclosed in “Note 14 – Other Accrued Liabilities”. The nine months ended September 30, 2020 are inclusive of $15 of liabilities incurred during the period, as well as $20 of reduction in estimated cash outflows. Liabilities settled in the current period and accretion expense are not material.
|
|
(4)
|
Miscellaneous primarily includes an accrued indemnification liability of $40 and $41 at September 30, 2020 and December 31, 2019, respectively.
|
Note 17. Commitments and Contingent Liabilities
Litigation Overview
In addition to the matters discussed below, the Company and certain of its subsidiaries, from time to time, are subject to various lawsuits, claims, assessments, and proceedings with respect to product liability, intellectual property, personal injury, commercial, contractual, employment, governmental, environmental, anti-trust, and other such matters that arise in the ordinary course of business. In addition, Chemours, by virtue of its status as a subsidiary of DuPont prior to the Separation, is subject to or required under the Separation-related agreements executed prior to the Separation to indemnify DuPont against various pending legal proceedings. It is not possible to predict the outcomes of these various lawsuits, claims, assessments, or proceedings. Except as noted below, while management believes it is reasonably possible that Chemours could incur losses in excess of the amounts accrued, if any, for the aforementioned proceedings, it does not believe any such loss would have a material impact on the Company’s consolidated financial position, results of operations, or cash flows. Additional disputes between Chemours and DuPont may also arise with respect to indemnification matters, including disputes based on matters of law or contract interpretation. If and to the extent these disputes arise, they could materially adversely affect Chemours.
The Company accrues for litigation matters when it is probable that a liability has been incurred, and the amount of the liability can be reasonably estimated. Legal costs such as outside counsel fees and expenses are recognized in the period in which the expense was incurred. Management believes the Company’s litigation accruals are appropriate based on the facts and circumstances for each matter, which are discussed in further detail below.
The following table sets forth the components of the Company’s accrued litigation at September 30, 2020 and December 31, 2019.
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Asbestos
|
|
$
|
34
|
|
|
$
|
34
|
|
PFOA
|
|
|
21
|
|
|
20
|
|
All other matters
|
|
|
4
|
|
|
6
|
|
Total accrued litigation
|
|
$
|
59
|
|
|
$
|
60
|
|
22
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
The following table sets forth the current and long-term components of the Company’s accrued litigation and their balance sheet locations at September 30, 2020 and December 31, 2019.
|
|
Balance Sheet Location
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Accrued Litigation:
|
|
|
|
|
|
|
|
|
|
|
Current accrued litigation
|
|
Other accrued liabilities (Note 14)
|
|
$
|
8
|
|
|
$
|
10
|
|
Long-term accrued litigation
|
|
Other liabilities (Note 16)
|
|
|
51
|
|
|
|
50
|
|
Total accrued litigation
|
|
|
|
$
|
59
|
|
|
$
|
60
|
|
Fayetteville Works, Fayetteville, North Carolina
For information regarding the Company’s ongoing litigation and environmental remediation matters at its Fayetteville Works site in Fayetteville, North Carolina (“Fayetteville”), refer to “Fayetteville Works, Fayetteville, North Carolina” under the “Environmental Overview” within this “Note 17 – Commitments and Contingent Liabilities”.
Asbestos
In the Separation, DuPont assigned its asbestos docket to Chemours. At September 30, 2020 and December 31, 2019, there were approximately 1,100 lawsuits pending against DuPont alleging personal injury from exposure to asbestos. These cases are pending in state and federal court in numerous jurisdictions in the U.S. and are individually set for trial. A small number of cases are pending outside of the U.S. Most of the actions were brought by contractors who worked at sites between the 1950s and the 1990s. A small number of cases involve similar allegations by DuPont employees or household members of contractors or DuPont employees. Finally, certain lawsuits allege personal injury as a result of exposure to DuPont products.
At September 30, 2020 and December 31, 2019, Chemours had an accrual of $34 related to these matters.
Benzene
In the Separation, DuPont assigned its benzene docket to Chemours. At September 30, 2020 and December 31, 2019, there were 18 and 16 cases pending against DuPont alleging benzene-related illnesses, respectively. These cases consist of premises matters involving contractors and deceased former employees who claim exposure to benzene while working at DuPont sites primarily in the 1960s through the 1980s, and product liability claims based on alleged exposure to benzene found in trace amounts in aromatic hydrocarbon solvents used to manufacture DuPont products such as paints, thinners, and reducers.
Management believes that a loss is reasonably possible as to the docket as a whole; however, given the evaluation of each benzene matter is highly fact-driven and impacted by disease, exposure, and other factors, a range of such losses cannot be reasonably estimated at this time.
PFOA
Chemours does not, and has never, used “PFOA” (collectively, perfluorooctanoic acids and its salts, including the ammonium salt) as a polymer processing aid and/or sold it as a commercial product. Prior to the Separation, the performance chemicals segment of DuPont made PFOA at Fayetteville and used PFOA as a processing aid in the manufacture of fluoropolymers and fluoroelastomers at certain sites, including: Washington Works, Parkersburg, West Virginia; Chambers Works, Deepwater, New Jersey; Dordrecht Works, Netherlands; Changshu Works, China; and, Shimizu, Japan. These sites are now owned and/or operated by Chemours.
At September 30, 2020 and December 31, 2019, Chemours maintained accruals of $21 and $20, respectively, related to PFOA matters under the Leach Settlement, DuPont’s obligations under agreements with the U.S. Environmental Protection Agency (“EPA”), and voluntary commitments to the New Jersey Department of Environmental Protection (“NJ DEP”). These obligations and voluntary commitments include surveying, sampling, and testing drinking water in and around certain Company sites, and offering treatment or an alternative supply of drinking water if tests indicate the presence of PFOA in drinking water at or greater than the state or the national health advisory. The Company will continue to work with the EPA and other authorities regarding the extent of work that may be required with respect to these matters.
23
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Leach Settlement
In 2004, DuPont settled a class action captioned Leach v. DuPont, filed in West Virginia state court, alleging that approximately 80,000 residents living near the Washington Works facility had suffered, or may suffer, deleterious health effects from exposure to PFOA in drinking water. Among the settlement terms, DuPont funded a series of health studies by an independent science panel of experts (“C8 Science Panel”) to evaluate available scientific evidence on whether any probable link exists, as defined in the settlement agreement, between exposure to PFOA and disease.
The C8 Science Panel found probable links, as defined in the settlement agreement, between exposure to PFOA and pregnancy-induced hypertension, including preeclampsia, kidney cancer, testicular cancer, thyroid disease, ulcerative colitis, and diagnosed high cholesterol. Under the terms of the settlement, DuPont is obligated to fund up to $235 for a medical monitoring program for eligible class members and pay the administrative costs associated with the program, including class counsel fees. The court-appointed Director of Medical Monitoring implemented the program, and testing is ongoing with associated payments to service providers disbursed from an escrow account which the Company replenishes pursuant to the settlement agreement. As of September 30, 2020, approximately $1.7 has been disbursed from escrow related to medical monitoring. While it is reasonably possible that the Company will incur additional costs related to the medical monitoring program, such costs cannot be reasonably estimated due to uncertainties surrounding the level of participation by eligible class members and the scope of testing.
In addition, under the Leach settlement agreement, DuPont must continue to provide water treatment designed to reduce the level of PFOA in water to six area water districts and private well users. At Separation, this obligation was assigned to Chemours, and $21 and $20 was accrued for these matters at September 30, 2020 and December 31, 2019, respectively.
PFOA Leach Class Personal Injury
Further, under the Leach settlement, class members may pursue personal injury claims against DuPont only for those diseases for which the C8 Science Panel determined a probable link exists. Approximately 3,500 lawsuits were subsequently filed in various federal and state courts in Ohio and West Virginia and consolidated in multi-district litigation (“MDL”) in Ohio federal court. These were resolved in March 2017 when DuPont entered into an agreement settling all MDL cases and claims, including all filed and unfiled personal injury cases and claims that were part of the plaintiffs’ counsel’s claims inventory, as well as cases tried to a jury verdict (“MDL Settlement”) for $670.7 in cash, with half paid by Chemours, and half paid by DuPont.
Concurrently with the MDL Settlement, DuPont and Chemours agreed to a limited sharing of potential future PFOA costs (indemnifiable losses, as defined in the Separation agreement between DuPont and Chemours) for a period of five years. During that five-year period, Chemours will annually pay future PFOA costs up to $25 and, if such amount is exceeded, DuPont will pay any excess amount up to the next $25 (which payment will not be subject to indemnification by Chemours), with Chemours annually bearing any further excess costs under the terms of the Separation agreement. After the five-year period, this limited sharing agreement will expire, and Chemours’ indemnification obligations under the Separation agreement will continue unchanged. Chemours has also agreed that it will not contest its indemnification obligations to DuPont under the Separation agreement for PFOA costs on the basis of defenses generally applicable to the indemnification provisions under the Separation agreement, including defenses relating to punitive damages, fines or penalties, or attorneys’ fees, and waives any such defenses with respect to PFOA costs. Chemours has, however, retained other defenses, including as to whether any particular PFOA claim is within the scope of the indemnification provisions of the Separation agreement.
While all MDL lawsuits were dismissed or resolved through the MDL Settlement, the MDL Settlement did not resolve PFOA personal injury claims of plaintiffs who did not have cases or claims in the MDL or personal injury claims based on diseases first diagnosed after February 11, 2017. Since the resolution of the MDL, approximately 82 personal injury cases have been filed and are pending in West Virginia or Ohio courts alleging status as a Leach class member. These cases are consolidated before the MDL court. A six-plaintiff trial involving kidney cancer matters previously set for June 2020 has been delayed due to COVID-19.
In March 2020, a two-plaintiff trial before the MDL court resulted in: a mistrial in a kidney cancer case when the jury could not reach a verdict, and an award of $40 in compensatory and emotional distress damages and $10 in loss of consortium damages in a testicular cancer case. The jury found that DuPont’s conduct did not warrant punitive damages. The Company will appeal the verdict. Management believes that the probability of a loss regarding the verdict is remote, given numerous meritorious grounds for pending post-trial motions and appeal.
24
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
State of Ohio
In February 2018, the State of Ohio initiated litigation against DuPont regarding historical PFOA emissions from the Washington Works site. Chemours is an additional named defendant. Ohio alleges damage to natural resources and fraudulent transfer in the spin-off that created Chemours and seeks damages including remediation and other costs and punitive damages.
PFAS
DuPont and Chemours have received governmental and regulatory inquiries and have been named in other litigations, including class actions, brought by individuals, municipalities, businesses, and water districts alleging exposure to and/or contamination from perfluorinated and polyfluorinated compounds (“PFAS”), including PFOA. Many actions include an allegation of fraudulent transfer in the spin-off that created Chemours. Chemours has declined DuPont’s requests for indemnity for fraudulent transfer claims.
Chemours has responded to letters and inquiries from governmental law enforcement entities regarding PFAS, including in January 2020, a letter informing it that the U.S. Department of Justice, Consumer Protection Branch, and the United States Attorney’s Office for the Eastern District of Pennsylvania are considering whether to open a criminal investigation under the Federal Food, Drug, and Cosmetic Act and asking that it retain its documents regarding PFAS and food contact applications. In July 2020, Chemours received a grand jury subpoena for documents. We are presently unable to predict the duration, scope, or result of any potential governmental, criminal, or civil proceeding that may result, the imposition of fines and penalties, and/or other remedies. We are also unable to develop a reasonable estimate of a possible loss or range of losses, if any.
Aqueous Film Forming Foam Matters
Chemours does not, and has never, manufactured aqueous film forming foam (“AFFF”). DuPont and Chemours have been named in approximately 800 matters, involving AFFF, which is used to extinguish hydrocarbon-based (i.e., Class B) fires and subject to U.S. military specifications. Most matters have been transferred to or filed directly into a multi-district litigation (“AFFF MDL”) in South Carolina federal court or identified by a party for transfer. The matters pending in the AFFF MDL allege damages as a result of contamination, in most cases due to migration from military installations or airports, or personal injury from exposure to AFFF. Plaintiffs seek to recover damages for investigating, monitoring, remediating, treating, and otherwise responding to the contamination. Others have claims for personal injury, property diminution, and punitive damages.
There are AFFF lawsuits pending outside the AFFF MDL that have not been designated by a party for inclusion in the MDL. These matters identifying DuPont and/or Chemours as a defendant are:
Valero Refining (“Valero”) has six pending state court lawsuits filed commencing in June 2019 regarding its Tennessee, Texas, Oklahoma, California, and Louisiana facilities. These lawsuits allege that several defendants that designed, manufactured, marketed, and/or sold AFFF or PFAS incorporated into AFFF have caused Valero to incur damages and costs including remediation, AFFF disposal, and replacement. Valero also alleges fraudulent transfer.
In September 2019, a lawsuit alleging personal injury resulting from exposure to AFFF in Long Island drinking water was filed by four individuals in New York state court. Plaintiffs also allege violation of New York Uniform Fraudulent Conveyance Act and seek compensatory and punitive damages, and medical monitoring.
State Natural Resource Damages Matters
In addition to the State of New Jersey actions (as detailed below) and the State of Ohio action (as detailed above), the states of Vermont, New Hampshire, New York, Michigan, and North Carolina have filed lawsuits against defendants, including DuPont and Chemours, relating to the alleged contamination of state natural resources with PFAS compounds either from AFFF and/or other sources. These lawsuits seek damages including costs to investigate, clean up, restore, treat, monitor, or otherwise respond to contamination to natural resources. The lawsuits include counts for fraudulent transfer.
25
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Other PFAS Matters
DuPont has also been named in approximately 50 lawsuits pending in New York courts, which are not part of the Leach class, brought by individual plaintiffs alleging negligence and other claims in the release of PFAS, including PFOA, into drinking water, and seeking medical monitoring, compensatory, and punitive damages against current and former owners and suppliers of a manufacturing facility in Hoosick Falls, New York. Two other lawsuits in New York have been filed by a business seeking to recover its losses and by nearby property owners and residents in a putative class action seeking medical monitoring, compensatory and punitive damages, and injunctive relief.
In May 2017, the Water Works and Sewer Board of the Town of Centre, Alabama filed suit against numerous carpet manufacturers located in Dalton, Georgia and suppliers and former suppliers, including DuPont, in Alabama state court. The complaint alleges negligence, nuisance, and trespass in the release of PFAS, including PFOA, into a river leading to the town’s water source, and seeks compensatory and punitive damages.
In February 2018, the New Jersey-American Water Company, Inc. (“NJAW”) filed suit against DuPont and Chemours in New Jersey federal court alleging that discharges in violation of the New Jersey Spill Compensation and Control Act (“Spill Act”) were made into groundwater utilized in the NJAW Penns Grove water system. NJAW alleges that damages include costs associated with remediating, operating, and maintaining its system, and attorney fees. In October 2020, this matter was transferred to the AFFF MDL.
In October 2018, a putative class action was filed in Ohio federal court against 3M, DuPont, Chemours, and other defendants seeking class action status for U.S. residents having a detectable level of PFAS in their blood serum. The complaint seeks declaratory and injunctive relief, including the establishment of a “PFAS Science Panel”.
In December 2018, the owners of a dairy farm filed a lawsuit in Maine state court against numerous defendants including DuPont and Chemours alleging that their dairy farm was contaminated by PFAS, including perfluorooctanesulfonic acid (“PFOS”) and PFOA present in treated municipal sewer sludge used in agricultural spreading applications on their farm. The complaint asserts negligence, trespass, and other tort and state statutory claims and seeks damages.
In May 2019, a putative class action was filed in Delaware state court against two electroplating companies, 3M and DuPont, alleging responsibility for PFAS contamination, including PFOA and PFOS, in drinking water and the environment in the nearby community. Although initially named in the lawsuit, Chemours was subsequently dismissed. The putative class of residents alleges negligence, nuisance, trespass, and other claims and seeks medical monitoring, personal injury and property damages, and punitive damages. The matter was removed to federal court.
Since August 2019, eight Long Island water suppliers have filed lawsuits in New York federal court against defendants including DuPont and Chemours regarding alleged PFAS, PFOA, and PFOS contamination through releases from industrial and manufacturing facilities and business locations where PFAS-contaminated water was used for irrigation and sites where consumer products were disposed. The complaints allege products liability, negligence, nuisance, trespass, and fraudulent transfer. Plaintiffs seek declaratory and injunctive relief, as well as compensatory and punitive damages.
Since November 2019, two lawsuits representing approximately 35 residents have been filed against DuPont, Chemours, and other defendants alleging that they are responsible for PFAS contamination, including PFOA and PFOS, in groundwater and drinking water. Plaintiffs have claims including medical monitoring, property value diminution, trespass, and punitive damages. The lawsuits are pending in New Jersey federal court.
In November 2019, the City of Rome, Georgia filed suit against numerous carpet manufacturers located in Dalton, Georgia, suppliers, DuPont, and Chemours in Georgia state court alleging negligence, nuisance, and trespass in the release of perfluorinated compounds, including PFOA, into a river leading to the town’s water source. City of Rome alleges damages to property and lost profits, and expenses for abatement and remediation and punitive damages.
In December 2019, a putative class action was filed in Georgia state court on behalf of customers of the Rome, Georgia water division and the Floyd County, Georgia water department against numerous carpet manufacturers located in Dalton, Georgia, suppliers, DuPont, and Chemours in Georgia state court alleging negligence and nuisance and related to the release of perfluorinated compounds, including PFOA, into a river leading to their water sources. The matter was removed to federal court. Damages sought include compensatory damages for increased water surcharges, as well as punitive damages and injunctive relief for abatement and remediation.
26
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
In May 2020, the Weirton Area Water Board and City of Weirton, West Virginia, filed a lawsuit in West Virginia state court against defendants, including DuPont and Chemours, alleging PFAS, PFOA and PFOS contamination through releases from the manufacture, sale, and use of PFAS and from facilities owned by AccelorMittal. Damages sought include declaratory relief, economic damages, indemnification, expenses, remediation, and punitive damages. The matter has been removed to federal court.
In July and August 2020, lawsuits were filed in New Jersey federal court by parents of two adult children alleging that exposure to PFAS, including pre-natal exposure, resulted in the children’s cognitive delays, neurological, genetic, and autoimmune conditions. Plaintiffs claim compensatory and punitive damages.
In September 2020, the Golden State Water Company filed a lawsuit in California federal court against several defendants, including DuPont and Chemours, alleging manufacturers of PFOA and PFOS are responsible for contaminating the drinking water supply. The complaint alleges products liability, negligence, nuisance, trespass, and fraudulent transfer. Plaintiff seeks injunctive relief, as well as compensatory and punitive damages.
New Jersey Department of Environmental Protection Directives and Litigation
In March 2019, the NJ DEP issued two Directives and filed four lawsuits against Chemours and other defendants. The Directives are: (i) a state-wide PFAS Directive issued to DuPont, DowDuPont, DuPont Specialty Products USA (“DuPont SP USA”), Solvay S.A., 3M, and Chemours seeking a meeting to discuss future costs for PFAS-related costs incurred by the NJ DEP and establishing a funding source for such costs by the Directive recipients, and information relating to historic and current use of certain PFAS compounds; and, (ii) a Pompton Lakes Natural Resources Damages (“NRD”) Directive to DuPont and Chemours demanding $0.1 to cover the cost of preparation of a natural resource damage assessment plan and access to related documents.
The lawsuits filed in New Jersey state courts by the NJ DEP are: (i) in Salem County, against DuPont, 3M, and Chemours primarily alleging clean-up and removal costs and damages and natural resource damages under the Spill Act, the Water Pollution Control Act (“WPCA”), the Industrial Site Recovery Act (“ISRA”), and common law regarding past and present operations at Chambers Works, a site assigned to Chemours at Separation; (ii) in Middlesex County, against DuPont, DuPont SP USA, 3M, and Chemours primarily alleging clean-up and removal costs and damages and natural resource damages under the Spill Act, ISRA, WPCA, and common law regarding past and present operations at Parlin, a DuPont owned site; (iii) in Gloucester County, against DuPont and Chemours primarily alleging clean-up and removal costs and damages and natural resource damages under the Spill Act, WPCA, and common law regarding past operations at Repauno, a non-operating remediation site assigned to Chemours at Separation which has been sold; and, (iv) in Passaic County, against DuPont and Chemours primarily alleging clean-up and removal costs and damages and natural resource damages under the Spill Act, WPCA, and common law regarding past operations at Pompton Lakes, a non-operating remediation site assigned to Chemours at Separation. The alleged pollutants listed in the Salem County and Middlesex County matters above include PFAS. Each lawsuit also alleges fraudulent transfer.
In August 2020, a Second Amended Complaint was filed in each matter, adding fraudulent transfer and other claims against DuPont SP USA, Corteva, Inc., and DuPont de Nemours, Inc. For the Salem County matter, NJDEP added claims relating to failure to comply with state directives, including the state-wide PFAS Directive.
The matters were removed to federal court and consolidated for case management and pretrial purposes.
DuPont requested that Chemours defend and indemnify it in these matters. Chemours has accepted the defense while reserving rights and declining DuPont’s demand as to matters under ISRA, fraudulent transfer, or involving other DuPont entities.
PFOA and PFAS Summary
With the exception of the trial verdict in the testicular cancer case noted above, management believes that it is reasonably possible that the Company could incur losses related to PFOA and/or PFAS matters in excess of amounts accrued, but any such losses are not estimable at this time due to various reasons, including, among others, that such matters are in their early stages and have significant factual issues to be resolved.
27
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
U.S. Smelter and Lead Refinery, Inc.
There are six lawsuits, including a putative class action, pending against DuPont by area residents concerning the U.S. Smelter and Lead Refinery multi-party Superfund site in East Chicago, Indiana. Several of the lawsuits allege that Chemours is now responsible for DuPont environmental liabilities. The lawsuits include allegations for personal injury damages, property diminution, and other damages. At Separation, DuPont assigned Chemours its former plant site, which is located south of the residential portion of the Superfund area, and its responsibility for the environmental remediation at the Superfund site. Management believes a loss is reasonably possible, but not estimable at this time due to various reasons including, among others, that such matters are in their early stages and have significant factual issues to be resolved.
Securities Litigation
In October 2019, a putative class action was filed in Delaware federal court against Chemours and certain of its officers. Following appointment of lead plaintiff, the New York State Teachers’ Retirement System, and counsel, the plaintiff filed an amended complaint alleging that the defendants violated the Securities and Exchange Act of 1934 by making materially false and misleading statements and omissions in public disclosures regarding environmental liabilities and litigation matters assigned to Chemours in connection with its spin-off from DuPont. The amended complaint seeks a class of purchasers of Chemours stock between February 16, 2017 and August 1, 2019 and demands compensatory damages and fees.
Commencing in July 2020, follow-on derivative lawsuits were filed by individual shareholders in Delaware courts against Chemours, its directors, and certain of its officers. The lawsuits rely on factual allegations similar to those in the securities action discussed above and allege breach of fiduciary duty and other claims.
Management believes that it is not possible at this time to reasonably assess the outcome of these litigations or to estimate the loss or range of loss, if any, as the matters are in the early stages with significant issues to be resolved. The Company believes that it has applicable insurance, and coverage has been accepted by the primary insurance carrier with a reservation of rights for the putative class action matter. If the Company were not to prevail in the litigations and were to fail to secure insurance coverage or ample insurance coverage, the impact could be material to the Company’s results of operations, financial position, and cash flows.
Mining Solutions Facility Construction Stoppage
In March 2018, a civil association in Mexico filed a complaint against the government authorities involved in the permitting process of the Company’s new Mining Solutions facility under construction in Gomez Palacio, Durango, Mexico. The claimant sought and obtained a suspension from the district judge to stop the Company’s construction work. The suspension was subsequently lifted on appeal and affirmed by the Supreme Court of Mexico. A second similar complaint was filed in September 2019, and again, a suspension of construction was granted. Chemours has filed an appeal. In the event that the suspension of construction is ultimately upheld, the Company would incur $26 of contract termination fees with a third-party services provider.
In August 2017, a lawsuit was filed by several residents of Durango, Mexico against the government authority involved in granting the Company’s environmental permit for the aforementioned facility. Construction was not suspended in this matter, and the defendants and the Company have responded to the complaint. In October 2020, an Administrative Federal Tribunal in Mexico City, Mexico nullified the existing environmental permit and requested its amendment, including details regarding the handling, storage, and offloading of ammonia at the Company’s facility. The Company will file an appeal and follow an administrative procedure to resolve this matter.
At September 30, 2020, the Company had $145 of long-lived assets under construction at the facility, $10 of other related prepaid costs, and $51 of the Company’s goodwill assigned to the Mining Solutions reporting unit. Management believes these amounts are recoverable as of September 30, 2020.
Ore Feedstock Contract Dispute
In July 2020, Iluka Resources Limited, one of the Company’s suppliers of ore feedstock, commenced breach of contract proceedings against the Company in New York state court. Management believes that the lawsuit lacks merit, and that the Company’s actions have been consistent with its rights under the provisions of the contract. The outcome of this matter is not expected to have a material impact on the Company’s results of operations or financial position, and management does not anticipate any impact on the Company’s supply of ore feedstock.
28
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Environmental Overview
Chemours, due to the terms of the Separation-related agreements with DuPont, is subject to contingencies pursuant to environmental laws and regulations that in the future may require further action to correct the effects on the environment of prior disposal practices or releases of chemical substances, which are attributable to DuPont’s activities before it spun-off Chemours. Much of this liability results from the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”, often referred to as “Superfund”), the Resource Conservation and Recovery Act (“RCRA”), and similar federal, state, local, and foreign laws. These laws require Chemours to undertake certain investigative, remediation, and restoration activities at sites where Chemours conducts or once conducted operations or at sites where Chemours-generated waste was disposed. The accrual also includes estimated costs related to a number of sites identified for which it is probable that environmental remediation will be required, but which are not currently the subject of enforcement activities.
Chemours accrues for remediation activities when it is probable that a liability has been incurred and a reasonable estimate of the liability can be made. Where the available information is sufficient to estimate the amount of liability, that estimate has been used. Where the available information is only sufficient to establish a range of probable liability, and no point within the range is more likely than any other, the lower end of the range has been used. Estimated liabilities are determined based on existing remediation laws and technologies and the Company’s planned remedial responses, which are derived from environmental studies, sampling, testing, and analyses. Inherent uncertainties exist in such evaluations, primarily due to unknown environmental conditions, changing governmental regulations regarding liability, and emerging remediation technologies. These accruals are adjusted periodically as remediation efforts progress and as additional technological, regulatory, and legal information becomes available. Environmental liabilities and expenditures include claims for matters that are liabilities of DuPont and its subsidiaries, which Chemours may be required to indemnify pursuant to the Separation-related agreements. These accrued liabilities are undiscounted and do not include claims against third parties. Costs related to environmental remediation are charged to expense in the period that the associated liability is accrued.
The following table sets forth the components of the Company’s environmental remediation liabilities at September 30, 2020 and December 31, 2019 for the five sites that are deemed the most significant by management, including Fayetteville as further discussed below.
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Chambers Works, Deepwater, New Jersey
|
|
$
|
19
|
|
|
$
|
20
|
|
East Chicago, Indiana
|
|
|
14
|
|
|
|
17
|
|
Fayetteville Works, Fayetteville, North Carolina
|
|
|
199
|
|
|
|
201
|
|
Pompton Lakes, New Jersey
|
|
|
42
|
|
|
|
43
|
|
USS Lead, East Chicago, Indiana
|
|
|
13
|
|
|
|
13
|
|
All other sites
|
|
|
111
|
|
|
|
112
|
|
Total environmental remediation
|
|
$
|
398
|
|
|
$
|
406
|
|
The following table sets forth the current and long-term components of the Company’s environmental remediation liabilities and their balance sheet locations at September 30, 2020 and December 31, 2019.
|
|
Balance Sheet Location
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Environmental Remediation:
|
|
|
|
|
|
|
|
|
|
|
Current environmental remediation
|
|
Other accrued liabilities (Note 14)
|
|
$
|
97
|
|
|
$
|
74
|
|
Long-term environmental remediation
|
|
Other liabilities (Note 16)
|
|
|
301
|
|
|
|
332
|
|
Total environmental remediation
|
|
|
|
$
|
398
|
|
|
$
|
406
|
|
29
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
The time-frame for a site to go through all phases of remediation (investigation and active clean-up) may take about 15 to 20 years, followed by several years of operation, maintenance, and monitoring (“OM&M”) activities. Remediation activities, including OM&M activities, vary substantially in duration and cost from site to site. These activities, and their associated costs, depend on the mix of unique site characteristics, evolving remediation technologies, and diverse regulatory requirements, as well as the presence or absence of other potentially responsible parties. In addition, for claims that Chemours may be required to indemnify DuPont pursuant to the Separation-related agreements, Chemours, through DuPont, has limited available information for certain sites or is in the early stages of discussions with regulators. For these sites in particular, there may be considerable variability between the clean-up activities that are currently being undertaken or planned and the ultimate actions that could be required. Therefore, considerable uncertainty exists with respect to environmental remediation costs and, under adverse changes in circumstances, although deemed remote, the potential liability may range up to approximately $560 above the amount accrued at September 30, 2020.
Chemours incurred environmental remediation expenses of $14 and $53 for the three and nine months ended September 30, 2020, respectively, and $10 and $60 for the three and nine months ended September 30, 2019, respectively.
Fayetteville Works, Fayetteville, North Carolina
Fayetteville has been in operation since the 1970s and is located next to the Cape Fear River southeast of the City of Fayetteville, North Carolina. Hexafluoropropylene oxide dimer acid (“HFPO Dimer Acid”, sometimes referred to as “GenX” or “C3 Dimer Acid”) is manufactured at Fayetteville. The Company has operated the site since its separation from DuPont in 2015.
The Company believes that discharges from Fayetteville to the Cape Fear River, site surface water, groundwater, and air emissions have not impacted the safety of drinking water in North Carolina. The Company is cooperating with a variety of ongoing inquiries and investigations from federal, state, and local authorities, regulators, and other governmental entities.
Consent Order with North Carolina Department of Environmental Quality (“NC DEQ”)
In September 2017, the NC DEQ issued a 60-day notice of intent to suspend the National Pollutant Discharge Elimination System (“NPDES”) permit for Fayetteville, and the State of North Carolina filed an action in North Carolina state court regarding site discharges, seeking a temporary restraining order and preliminary injunction, as well as other relief, including abatement and site correction. The state court entered a partial consent order resolving NC DEQ’s motion for a temporary restraining order.
In November 2017, NC DEQ informed the Company that it was suspending the NPDES permit for Fayetteville. The Company thereafter commenced the capture and separate disposal of all process wastewater from Fayetteville related to the Company’s own operations.
In June 2018, the North Carolina Legislature enacted legislation (i) granting the governor the authority, in certain circumstances, to require a facility with unauthorized PFAS discharges to cease operations, and (ii) granting the governor the authority, in certain circumstances, to direct the NC DEQ secretary to order a PFAS discharger to establish permanent replacement water supplies for parties whose water was contaminated by the discharge.
In July 2018, Cape Fear River Watch (“CFRW”), a non-profit organization, sued NC DEQ in North Carolina state court, seeking to require NC DEQ to take additional actions at Fayetteville. On August 29, 2018, CFRW sued the Company in North Carolina federal court for alleged violations of the Clean Water Act (“CWA”) and the Toxic Substances Control Act (“TSCA”), seeking declaratory and injunctive relief and penalties.
In February 2019, the North Carolina Superior Court for Bladen County approved a Consent Order (“CO”) between NC DEQ, CFRW and the Company, resolving the State’s and CFRW’s lawsuits and other matters (including Notices of Violation (“NOVs”) issued by the State). Under the terms of the CO, Chemours paid $13 in March 2019 to cover a civil penalty and investigative costs and agreed to certain compliance measures (with stipulated penalties for failures to do so), including the following:
|
•
|
Install a thermal oxidizer to control all PFAS in process streams from certain processes at Fayetteville at an efficiency of 99.99%;
|
|
•
|
Develop, submit, and implement, subject to approval from NC DEQ and CFRW, a plan for interim actions that are economically and technologically feasible to achieve the maximum PFAS reduction from Fayetteville to the Cape Fear River within a two-year period;
|
|
•
|
Develop and implement, subject to approval, a Corrective Action Plan that complies with North Carolina’s groundwater standards and guidance provided by NC DEQ. At a minimum, the Corrective Action Plan must require Chemours to reduce the total loading of PFAS originating from Fayetteville to surface water by at least 75% from baseline, as defined by the CO; and,
|
|
•
|
Provide and properly maintain permanent drinking water supplies, including via whole-building filtration units and reverse osmosis (“RO”) units to qualifying surrounding properties with private drinking water wells.
|
30
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
In August 2020, NC DEQ, CFRW, and the Company reached agreement on the terms of an addendum to the CO (the “Addendum”), which includes specified remedial measures and defined timelines for reducing PFAS loadings from Fayetteville to the Cape Fear River. The Addendum also includes stipulated financial penalties, inclusive of daily and weekly fines for untimeliness in meeting deadlines for construction, installation and other requirements, as well as intermittent performance-based fines for noncompliance in meeting PFAS loading reduction requirements and removal efficiency targets. After a period of public comment, the Addendum was approved by the North Carolina Superior Court for Bladen County on October 12, 2020. A Motion to Intervene filed by Cape Fear Public Utility Authority was denied.
The following table sets forth the on-site and off-site components of the Company’s accrued environmental remediation liabilities related to PFAS at Fayetteville at September 30, 2020 and December 31, 2019.
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
On-site remediation
|
|
$
|
142
|
|
|
$
|
155
|
|
Off-site groundwater remediation
|
|
|
57
|
|
|
|
46
|
|
Total accrued liabilities
|
|
$
|
199
|
|
|
$
|
201
|
|
The following table sets forth the current and long-term components of the Company’s accrued environmental remediation liabilities related to PFAS at Fayetteville and their balance sheet locations at September 30, 2020 and December 31, 2019.
|
|
Balance Sheet Location
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Current accrued liabilities
|
|
Other accrued liabilities (Note 14)
|
|
$
|
39
|
|
|
$
|
20
|
|
Long-term accrued liabilities
|
|
Other liabilities (Note 16)
|
|
|
160
|
|
|
|
181
|
|
Total accrued liabilities
|
|
|
|
$
|
199
|
|
|
$
|
201
|
|
Emissions to air
Fayetteville operates multiple permitted air discharge stacks, blowers, and vents as part of its manufacturing activities. A thermal oxidizer (“TO”) became fully operational at the site on December 27, 2019, and Chemours switched to the permitted operating scenario for the TO on December 31, 2019 as set forth in the CO. The TO is designed to reduce aerial PFAS emissions from Fayetteville, and, on March 30, 2020, Chemours announced that testing results conducted in the first 90 days of operation show that the TO is controlling PFAS emissions at an average efficiency exceeding 99.999%. Testing was conducted by Chemours and monitored by the North Carolina Division of Air Quality (“NC DAQ”). Environmental costs are capitalized and subsequently depreciated if the costs extend the useful life of the property, increase the property’s capacity, and/or reduce or prevent contamination from future operations.
Off-site replacement drinking water supplies
The CO requires the Company to provide permanent replacement drinking water supplies, including via connection to public water supply, whole building filtration units and/or RO units, to qualifying surrounding residents, businesses, schools, and public buildings with private drinking water wells. Qualifying surrounding properties with private drinking water wells that have tested above the state provisional health goal of 140 parts per trillion (ppt) for GenX may be eligible for public water or a whole building filtration system. Qualifying surrounding properties with private drinking water wells that have tested above 10 ppt for GenX or other perfluorinated compounds (“Table 3 Compounds”) are eligible for three under-sink RO units. The Company provides bottled drinking water to a qualifying property when it becomes eligible for a replacement drinking water supply, and continues to provide delivery of bottled drinking water to the property until the eligible supply is established or installed. Under the terms of the CO, Chemours must make the offer to install a water treatment system to property owners in writing multiple times, and property owners have approximately one year to accept the Company’s offer before it expires.
31
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
The Company’s estimated liability for off-site replacement drinking water supplies is based on management’s assessment of the current facts and circumstances for this matter, which are subject to various assumptions that include, but are not limited to, the number of affected surrounding properties, response rates to the Company’s offer, the timing of expiration of offers made to the property owners, the type of water treatment systems selected (i.e., whole building filtration or RO units), the cost of the selected water treatment systems, and any related OM&M requirements, fines and penalties, and other charges contemplated by the CO. For off-site drinking water supplies, OM&M is accrued for 20 years on an undiscounted basis based on the Company’s current plans under the CO. For the three and nine months ended September 30, 2020, the Company accrued $9 and $27, respectively, for off-site groundwater testing and water treatment system installations at additional qualifying properties in the vicinity surrounding Fayetteville. The amounts accrued during the three and nine months ended September 30, 2020 are net of $3 and $7, respectively, of changes in estimates related to the cost of installing, maintaining, and monitoring certain water treatment systems. During most of the second quarter of 2020, testing of drinking water wells and water treatment system installations were temporarily suspended in connection with health and safety precautions taken during the COVID-19 pandemic. Chemours resumed residential sampling and installation of water treatment systems in June 2020. Off-site installation, maintenance, and monitoring may be impacted by additional changes in estimates as actual experience may differ from management’s estimates. It is currently estimated that $57 of disbursements related to off-site replacement drinking water supplies and toxicity studies will be made over approximately 20 years.
On-site surface water and groundwater remediation
Abatement and remediation measures already taken by Chemours, including the capture and separate disposal of its operations’ process wastewater and other interim actions, have addressed and abated nearly all PFAS discharges from the Company’s continuing operations at Fayetteville. However, the Company continues to have active dialogue with NC DEQ and other stakeholders regarding the potential remedies that are both economically and technologically feasible to achieve the CO objectives related to site surface water and groundwater.
In the fourth quarter of 2019, the Company completed and submitted its Cape Fear River PFAS Loading Reduction Plan - Supplemental Information Report and its Corrective Action Plan (“CAP”) to NC DEQ. The Supplemental Information Report provided information to support the evaluation of potential interim remedial options to reduce PFAS loadings to surface waters. The CAP described potential long-term remediation activities to address PFAS in on-site groundwater and surface waters at the site, in accordance with the requirements of the CO and the North Carolina groundwater standards, and built upon the previous submissions to NC DEQ. The NC DEQ made the CAP available for public review and comment until April 6, 2020, and the Company is awaiting formal response to the CAP from NC DEQ following the conclusion of the public comment period. With respect to the CO, the Addendum was approved by the North Carolina Superior Court for Bladen County on October 12, 2020 and represents our agreement with the NC DEQ and CFRW regarding specified remedial measures and defined timelines to reduce PFAS loadings from Fayetteville to the Cape Fear River, including construction of a barrier wall with groundwater extraction system to be completed by March 15, 2023. Detailed engineering and design work has commenced with NC DEQ approval of permit applications anticipated in August 2021, as well as two stages of design approval anticipated in August 2021 and March 2022.
The Company’s estimated liability for the remediation activities that are probable and estimable is based on the CO, the Addendum, the CAP, and management’s assessment of the current facts and circumstances, which are subject to various assumptions including the transport pathways (being pathways by which PFAS reaches the Cape Fear River) which will require remedial actions, the types of interim and permanent site surface water and on-site remedies and treatment systems selected and implemented, the estimated cost of such potential remedies and treatment systems, any related OM&M requirements, and other charges contemplated by the CO and the Addendum. The actual cost of a permanent on-site groundwater treatment system primarily depends on the determination of certain significant design details, notably the actual barrier wall installation method (i.e., slurry wall vs. steel sheets), configuration of extraction wells, and extraction rates.
Accordingly, during the third quarter of 2020, based on the CO, the Addendum, the CAP, and management’s plans, which are based on current regulations and technology, there were no changes to the estimated on-site remediation liability. The Company has accrued $142 related to the estimated cost of on-site remediation, which is within the existing estimated range of potential outcomes, based on current potential remedial options, and projected to be paid over a period of approximately 20 years. The final costs of any selected remediation will depend primarily on the final approved design and actual labor and material costs. With respect to the Addendum, at this time, the Company believes that payment of any of the stipulated financial penalties for untimeliness or noncompliance is remote.
It is possible that issues relating to site discharges in various transport pathways, the selection of remediation alternatives to achieve PFAS loading reductions, or the operating effectiveness of the TO could result in further litigation and/or regulatory demands with regards to Fayetteville, including potential permit modifications or penalties under the CO and the Addendum. It is also possible that, as additional data is collected on the transport pathways and dialogue continues with NC DEQ and other stakeholders, the type or extent of remediation actions required to achieve the objectives committed to in the CO may change (increase or decrease) or remediation activities could be delayed. If such issues arise, or if the CO is further amended, an additional loss is reasonably possible, but not estimable at this time.
32
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Other matters related to Fayetteville
An NOV was received from the EPA in February 2019, alleging certain TSCA violations at Fayetteville. Matters raised in the NOV could have the potential to affect operations at Fayetteville. For this NOV, the Company responded to the EPA in March 2019, asserting that the Company has not violated environmental laws. The Company also received an NOV in April 2020 from NC DEQ, alleging an air permit violation under the North Carolina Administrative Code. As of September 30, 2020, management does not believe that a loss is probable.
In June 2020, the Company received an NOV from the NC DEQ, alleging violations of the North Carolina Solid Waste Generator Requirements in connection with clearing land and yard waste materials to a landfill during construction of the water treatment plant required for remediation under the CO. The Company responded that it did not commit a violation and had addressed any concerns prior to issuance of the NOV. Management does not believe that a loss is probable.
In 2019, civil actions were filed against DuPont and Chemours in North Carolina federal court relating to discharges from Fayetteville. These actions include a consolidated action brought by public water suppliers seeking damages and injunctive relief, a consolidated purported class action seeking medical monitoring, and property damage and/or other monetary and injunctive relief on behalf of the putative classes of property owners and residents in areas near or that draw drinking water from the Cape Fear River, and two actions encompassing several hundred private well owners seeking compensatory and punitive damages. Ruling on the Company’s motions in April 2019, the court dismissed the medical monitoring, injunctive demand, and many other alleged causes of actions in these lawsuits. It is possible that additional litigation may be filed against the Company and/or DuPont concerning the discharges.
In addition to natural resource damages matter filed by the State of North Carolina (as discussed within the “PFAS” section of this “Note 17 – Commitments and Contingent Liabilities”), in September 2020, three additional lawsuits were filed in North Carolina state court against Chemours and DuPont, as well as other defendants. One of the lawsuits is a putative class action on behalf of residents who are served by the Cape Fear Public Water utility, alleges negligence, nuisance, and other claims related to the release of perfluorinated compounds from Fayetteville, and seeks compensatory and punitive damages and medical monitoring. The other two lawsuits were filed on behalf of individuals residing near Fayetteville and allege negligence, nuisance, and other claims related to the release of perfluorinated compounds. The individuals seek compensatory property damages, punitive damages, and, in some cases, medical monitoring. All three lawsuits allege fraudulent transfer against DuPont and other DuPont entities, but not against Chemours. In October 2020, the cases were removed to federal court.
It is not possible at this point to predict the timing, course, or outcome of all governmental and regulatory inquiries and notices and litigation, and it is reasonably possible that these matters could materially affect the Company’s financial position, results of operations, and cash flows. In addition, local communities, organizations, and federal and state regulatory agencies have raised questions concerning HFPO Dimer Acid and other perfluorinated and polyfluorinated compounds at certain other manufacturing sites operated by the Company. It is possible that additional developments similar to those described above and centering on Fayetteville could arise in other locations.
33
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Note 18. Stock-based Compensation
The Company’s total stock-based compensation expense amounted to $3 and $12 for the three and nine months ended September 30, 2020, respectively, and $4 and $18 for the three and nine months ended September 30, 2019, respectively.
Stock Options
During the nine months ended September 30, 2020, Chemours granted approximately 2,780,000 non-qualified stock options to certain of its employees, of which 2,750,000 non-qualified stock options were granted in the first quarter of 2020. These awards will vest over a three-year period and expire 10 years from the date of grant. The fair value of the Company’s stock options is based on the Black-Scholes valuation model.
The following table sets forth the weighted-average assumptions used at the respective grant dates to determine the fair value of the Company’s stock option awards that were granted during the nine months ended September 30, 2020.
|
|
Nine Months Ended September 30, 2020
|
|
Risk-free interest rate
|
|
|
0.94
|
%
|
Expected term (years)
|
|
|
6.00
|
|
Volatility
|
|
|
53.18
|
%
|
Dividend yield
|
|
|
6.93
|
%
|
Fair value per stock option
|
|
$
|
3.74
|
|
The Company recorded $1 and $8 in stock-based compensation expense specific to its stock options for the three and nine months ended September 30, 2020, respectively, and $2 and $8 for the three and nine months ended September 30, 2019, respectively. At September 30, 2020, approximately 7,870,000 stock options remained outstanding.
Restricted Stock Units
During the nine months ended September 30, 2020, Chemours granted approximately 530,000 restricted stock units (“RSUs”) to certain of its employees. These awards will vest over a three-year period and, upon vesting, convert one-for-one to Chemours’ common stock. The fair value of the RSUs is based on the market price of the underlying common stock at the grant date.
The Company recorded $1 and $5 in stock-based compensation expense specific to its RSUs for the three and nine months ended September 30, 2020, respectively, and $1 and $5 for the three and nine months ended September 30, 2019, respectively. At September 30, 2020, approximately 1,110,000 RSUs remained non-vested.
Performance Share Units
During the nine months ended September 30, 2020, Chemours granted approximately 540,000 performance share units (“PSUs”) to key senior management employees. Upon vesting, these awards convert one-for-one to Chemours’ common stock if specified performance goals, including certain market-based conditions, are met over the three-year performance period specified in the grant, subject to exceptions through the respective vesting period of three years. Each grantee is granted a target award of PSUs, and may earn between 0% and 250% of the target amount depending on the Company’s performance against stated performance goals.
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 conditions are satisfied.
The Company recorded stock-based compensation expense of $1 and reductions of stock-based compensation of $1 specific to its PSUs for the three and nine months ended September 30, 2020, respectively, based on its assessment of Company performance relative to award-based financial objectives. The Company recorded less than $1 and $5 in stock-based compensation expense specific to its PSUs for the three and nine months ended September 30, 2019, respectively. At September 30, 2020, approximately 850,000 PSUs at 100% of the target amount remained non-vested.
34
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Employee Stock Purchase Plan
Since 2017, the Company has provided employees the opportunity to participate in The Chemours Company Employee Stock Purchase Plan (“ESPP”). Under the ESPP, a total of 7,000,000 shares of Chemours’ common stock is reserved and authorized for issuance to participating employees, as defined by the ESPP, which excludes executive officers of the Company. The ESPP provides for consecutive 12-month offering periods, each with two purchase periods in March and September within those offering periods. The initial offering period under the ESPP began on October 2, 2017. Participating employees are eligible to purchase the Company’s common stock at a discounted rate equal to 95% of its fair value on the last trading day of each purchase period. During the first and third quarters of 2020, the Company executed open market transactions to purchase its common stock on behalf of ESPP participants. Total purchases amounted to less than $1 and $1 for the three and nine months ended September 30, 2020, respectively, which approximated 105,000 shares of Chemours’ common stock purchased during the nine months ended September 30, 2020.
Note 19. Financial Instruments
Objectives and Strategies for Holding Financial Instruments
In the ordinary course of business, Chemours enters into contractual arrangements to reduce its exposure to foreign currency risks. The Company has established a financial risk management program, which currently includes four distinct risk management instruments: (i) foreign currency forward contracts, which are used to minimize the volatility in the Company’s earnings related to foreign exchange gains and losses resulting from remeasuring its monetary assets and liabilities that are denominated in non-functional currencies; (ii) foreign currency forward contracts, which are used to mitigate the risks associated with fluctuations in the euro against the U.S. dollar for forecasted U.S. dollar-denominated inventory purchases in certain of the Company’s international subsidiaries that use the euro as their functional currency; (iii) interest rate swaps, which are used to mitigate the volatility in the Company’s cash payments for interest due to fluctuations in LIBOR, as is applicable to the portion of the Company’s senior secured term loan facility denominated in U.S. dollars; and, (iv) euro-denominated debt, which is used to reduce the volatility in stockholders’ equity caused by changes in foreign currency exchange rates of the euro with respect to the U.S. dollar for certain of its international subsidiaries that use the euro as their functional currency. The Company’s financial risk management program reflects varying levels of exposure coverage and time horizons based on an assessment of risk. The program operates within Chemours’ financial risk management policies and guidelines, and the Company does not enter into derivative financial instruments for trading or speculative purposes.
Net Monetary Assets and Liabilities Hedge – Foreign Currency Forward Contracts
At September 30, 2020, the Company had 20 foreign currency forward contracts outstanding with an aggregate gross notional U.S. dollar equivalent of $528, and an average maturity of one month. At December 31, 2019, the Company had 16 foreign currency forward contracts outstanding with an aggregate gross notional U.S. dollar equivalent of $530, and an average maturity of one month. Chemours recognized net gains of $10 and $14 for the three and nine months ended September 30, 2020, respectively, and net gains of $1 and less than $1 for the three and nine months ended September 30, 2019, respectively, in other income (expense), net.
Cash Flow Hedge – Foreign Currency Forward Contracts
At September 30, 2020, the Company had 117 foreign currency forward contracts outstanding under its cash flow hedge program with an aggregate notional U.S. dollar equivalent of $86, and an average maturity of five months. At December 31, 2019, the Company had 150 foreign currency forward contracts outstanding under its cash flow hedge program with an aggregate notional U.S. dollar equivalent of $124, and an average maturity of five months. Chemours recognized pre-tax losses of $2 and $1 for the three and nine months ended September 30, 2020, respectively, and pre-tax gains of $5 and $7 for the three and nine months ended September 30, 2019, respectively, within accumulated other comprehensive loss. For the three and nine months ended September 30, 2020, $1 and $5 of gain was reclassified to the cost of goods sold from accumulated other comprehensive loss, respectively. For the three and nine months ended September 30, 2019, $2 and $8 of gain was reclassified to the cost of goods sold from accumulated other comprehensive loss, respectively.
The Company expects to reclassify an approximate $3 of net loss from accumulated other comprehensive loss to the cost of goods sold over the next 12 months, based on current foreign currency exchange rates.
35
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Cash Flow Hedge – Interest Rate Swaps
Beginning in the second quarter of 2020, the Company elected to expand its cash flow hedge program and enter into interest rate swaps. The objective of entering interest rate swaps is to mitigate the volatility in the Company’s cash payments for interest related to the portion of the Company’s senior secured term loan facility denominated in U.S. dollars, which bears a variable interest rate equal to, at the election of the Company, adjusted LIBOR plus 1.75% or adjusted base rate plus 0.75%, subject to an adjusted LIBOR or an adjusted base rate floor of 0.00% or 1.00%, respectively. All gains and losses resulting from the revaluation of the derivative instruments are recognized as a component of accumulated other comprehensive loss on the consolidated balance sheets during the period in which they occur, and are reclassified to interest expense, net in the consolidated statements of operations during the period in which the underlying transaction affects earnings.
At September 30, 2020, the Company had three interest rate swaps outstanding under its cash flow hedge program with an aggregate notional U.S. dollar equivalent of $400; each of the interest rate swaps mature on March 31, 2023. Chemours recognized pre-tax losses of less than $1 and $3 for the three and nine months ended September 30, 2020, respectively, within accumulated other comprehensive loss. For the three and nine months ended September 30, 2020, less than $1 of loss was reclassified to interest expense, net from accumulated other comprehensive loss.
The Company expects to reclassify an approximate $1 of net loss from accumulated other comprehensive loss to interest expense, net over the next 12 months.
Net Investment Hedge – Foreign Currency Borrowings
The Company recognized pre-tax losses of $32 and $40 for the three and nine months ended September 30, 2020, respectively, and pre-tax gains of $33 and $36 for the three and nine months ended September 30, 2019, respectively, on its net investment hedge within accumulated other comprehensive loss. No amounts were reclassified from accumulated other comprehensive loss for the Company’s net investment hedges during the three and nine months ended September 30, 2020 and 2019.
Fair Value of Derivative Instruments
The following table sets forth the fair value of the Company’s derivative assets and liabilities at September 30, 2020 and December 31, 2019.
|
|
|
|
Fair Value Using Level 2 Inputs
|
|
|
|
Balance Sheet Location
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Asset derivatives:
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
not designated as a hedging instrument
|
|
Accounts and notes receivable, net (Note 9)
|
|
$
|
—
|
|
|
$
|
1
|
|
Foreign currency forward contracts
designated as a cash flow hedge
|
|
Accounts and notes receivable, net (Note 9)
|
|
|
—
|
|
|
|
1
|
|
Total asset derivatives
|
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability derivatives:
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
not designated as a hedging instrument
|
|
Other accrued liabilities (Note 14)
|
|
$
|
—
|
|
|
$
|
1
|
|
Foreign currency forward contracts
designated as a cash flow hedge
|
|
Other accrued liabilities (Note 14)
|
|
|
2
|
|
|
|
—
|
|
Interest rate swaps
designated as a cash flow hedge
|
|
Other accrued liabilities (Note 14)
|
|
|
3
|
|
|
|
—
|
|
Total liability derivatives
|
|
|
|
$
|
5
|
|
|
$
|
1
|
|
The Company’s foreign currency forward contracts and interest rate swaps are classified as Level 2 financial instruments within the fair value hierarchy as the valuation inputs are based on quoted prices and market observable data of similar instruments. For derivative assets and liabilities, standard industry models are used to calculate the fair value of the various financial instruments based on significant observable market inputs, such as foreign exchange rates and implied volatilities obtained from various market sources. Market inputs are obtained from well-established and recognized vendors of market data, and are subjected to tolerance and/or quality checks.
36
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Summary of Financial Instruments
The following table sets forth the pre-tax changes in fair value of the Company’s financial instruments for the three and nine months ended September 30, 2020 and 2019.
|
|
Gain (Loss) Recognized In
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other
|
|
|
|
Cost of
|
|
|
Interest
|
|
|
Other Income
|
|
|
Comprehensive
|
|
Three Months Ended September 30,
|
|
Goods Sold
|
|
|
Expense, Net
|
|
|
(Expense), Net
|
|
|
Loss
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts not designated as a hedging instrument
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
—
|
|
Foreign currency forward contracts designated as a cash flow hedge
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2
|
)
|
Interest rate swaps designated as a cash flow hedge
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Euro-denominated debt designated as a net investment hedge
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts not designated as a hedging instrument
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
Foreign currency forward contracts designated as a cash flow hedge
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
Euro-denominated debt designated as a net investment hedge
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized In
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other
|
|
|
|
Cost of
|
|
|
Interest
|
|
|
Other Income
|
|
|
Comprehensive
|
|
Nine Months Ended September 30,
|
|
Goods Sold
|
|
|
Expense, Net
|
|
|
(Expense), Net
|
|
|
Loss
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts not designated as a hedging instrument
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14
|
|
|
$
|
—
|
|
Foreign currency forward contracts designated as a cash flow hedge
|
|
|
5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
Interest rate swaps designated as a cash flow hedge
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3
|
)
|
Euro-denominated debt designated as a net investment hedge
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts not designated as a hedging instrument
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign currency forward contracts designated as a cash flow hedge
|
|
|
8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7
|
|
Euro-denominated debt designated as a net investment hedge
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
36
|
|
37
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Note 20. Long-term Employee Benefits
Chemours sponsors defined benefit pension plans for certain of its employees in various jurisdictions outside of the U.S. The Company’s net periodic pension (cost) income is based on estimated values and the use of assumptions about the discount rate, expected return on plan assets, and the rate of future compensation increases received by its employees.
The following table sets forth the Company’s net periodic pension (cost) income and amounts recognized in other comprehensive income for the three and nine months ended September 30, 2020 and 2019.
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Service cost
|
|
$
|
(4
|
)
|
|
$
|
(3
|
)
|
|
$
|
(11
|
)
|
|
$
|
(9
|
)
|
Interest cost
|
|
|
(2
|
)
|
|
|
(4
|
)
|
|
|
(6
|
)
|
|
|
(13
|
)
|
Expected return on plan assets
|
|
|
4
|
|
|
|
12
|
|
|
|
12
|
|
|
|
38
|
|
Amortization of actuarial loss
|
|
|
(2
|
)
|
|
|
(6
|
)
|
|
|
(6
|
)
|
|
|
(18
|
)
|
Amortization of prior service gain
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
|
|
2
|
|
Settlement loss
|
|
|
(1
|
)
|
|
|
(3
|
)
|
|
|
(1
|
)
|
|
|
(4
|
)
|
Curtailment gain
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
Total net periodic pension cost
|
|
$
|
(3
|
)
|
|
$
|
(3
|
)
|
|
$
|
(9
|
)
|
|
$
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss)
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
(3
|
)
|
Prior service (cost) benefit
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
5
|
|
Amortization of actuarial loss
|
|
|
2
|
|
|
|
6
|
|
|
|
6
|
|
|
|
18
|
|
Amortization of prior service gain
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
(2
|
)
|
Settlement loss
|
|
|
1
|
|
|
|
3
|
|
|
|
1
|
|
|
|
4
|
|
Curtailment gain
|
|
|
4
|
|
|
|
—
|
|
|
|
4
|
|
|
|
—
|
|
Effect of foreign exchange rates
|
|
|
(3
|
)
|
|
|
9
|
|
|
|
(4
|
)
|
|
|
10
|
|
Benefit recognized in other comprehensive income
|
|
|
3
|
|
|
|
17
|
|
|
|
5
|
|
|
|
32
|
|
Total changes in plan assets and benefit obligations recognized in other comprehensive income
|
|
$
|
—
|
|
|
$
|
14
|
|
|
$
|
(4
|
)
|
|
$
|
28
|
|
The Company made cash contributions of $3 and $17 to its defined benefit pension plans during the three and nine months ended September 30, 2020, respectively, and $2 and $15 for the three and nine months ended September 30, 2019, respectively, and expects to make additional cash contributions of $2 to its defined benefit pension plans during the remainder of 2020. The Company’s future contributions to its defined benefit pension plans are dependent on market-based discount rates, and, as stated in “Note 1 – Background, Description of the Business, and Basis of Presentation” to these interim consolidated financial statements, may differ due to the impacts of the COVID-19 pandemic on the macroeconomic environment.
38
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
Note 21. Segment Information
Chemours’ reportable segments are Fluoroproducts, Chemical Solutions, and Titanium Technologies. Corporate costs and certain legal and environmental expenses, stock-based compensation expenses, and foreign exchange gains and losses arising from the remeasurement of balances in currencies other than the functional currency of the Company’s legal entities are reflected in Corporate and Other.
Segment net sales include transfers to another reportable segment. Certain products are transferred between segments on a basis intended to reflect, as nearly as practicable, the market value of the products. These product transfers were limited and were not significant for each of the periods presented. Depreciation and amortization includes depreciation on research and development facilities and the amortization of other intangible assets, excluding any write-downs of assets.
Adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”) is the primary measure of segment profitability used by the Company’s Chief Operating Decision Maker and is defined as income (loss) before income taxes, excluding the following:
|
•
|
interest expense, depreciation, and amortization;
|
|
•
|
non-operating pension and other post-retirement employee benefit costs, which represents the components of net periodic pension (income) costs excluding the service cost component;
|
|
•
|
exchange (gains) losses included in other income (expense), net;
|
|
•
|
restructuring, asset-related, and other charges;
|
|
•
|
(gains) losses on sales of assets and businesses; and,
|
|
•
|
other items not considered indicative of the Company’s ongoing operational performance and expected to occur infrequently.
|
The following table sets forth certain summary financial information for the Company’s reportable segments for the three and nine months ended September 30, 2020 and 2019.
Three Months Ended September 30,
|
|
Fluoroproducts
|
|
|
Chemical
Solutions
|
|
|
Titanium
Technologies
|
|
|
Segment Total
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers
|
|
$
|
533
|
|
|
$
|
88
|
|
|
$
|
612
|
|
|
$
|
1,233
|
|
Adjusted EBITDA
|
|
|
112
|
|
|
|
12
|
|
|
|
129
|
|
|
|
253
|
|
Depreciation and amortization
|
|
|
35
|
|
|
|
6
|
|
|
|
32
|
|
|
|
73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers
|
|
$
|
636
|
|
|
$
|
140
|
|
|
$
|
614
|
|
|
$
|
1,390
|
|
Adjusted EBITDA
|
|
|
122
|
|
|
|
23
|
|
|
|
137
|
|
|
|
282
|
|
Depreciation and amortization
|
|
|
34
|
|
|
|
5
|
|
|
|
30
|
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
Fluoroproducts
|
|
|
Chemical
Solutions
|
|
|
Titanium
Technologies
|
|
|
Segment Total
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers
|
|
$
|
1,657
|
|
|
$
|
263
|
|
|
$
|
1,711
|
|
|
$
|
3,631
|
|
Adjusted EBITDA
|
|
|
350
|
|
|
|
45
|
|
|
|
361
|
|
|
|
756
|
|
Depreciation and amortization
|
|
|
106
|
|
|
|
16
|
|
|
|
95
|
|
|
|
217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers
|
|
$
|
2,034
|
|
|
$
|
404
|
|
|
$
|
1,735
|
|
|
$
|
4,173
|
|
Adjusted EBITDA
|
|
|
461
|
|
|
|
55
|
|
|
|
390
|
|
|
|
906
|
|
Depreciation and amortization
|
|
|
100
|
|
|
|
18
|
|
|
|
90
|
|
|
|
208
|
|
Corporate and Other depreciation and amortization expense amounted to $6 and $23 for the three and nine months ended September 30, 2020, respectively, and $8 and $24 for the three and nine months ended September 30, 2019, respectively.
39
The Chemours Company
Notes to the Interim Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
The following table sets forth a reconciliation of segment Adjusted EBITDA to the Company’s consolidated net income before income taxes for the three and nine months ended September 30, 2020 and 2019.
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Segment Adjusted EBITDA
|
|
$
|
253
|
|
|
$
|
282
|
|
|
$
|
756
|
|
|
$
|
906
|
|
Corporate and Other Adjusted EBITDA
|
|
|
(43
|
)
|
|
|
(34
|
)
|
|
|
(123
|
)
|
|
|
(113
|
)
|
Interest expense, net
|
|
|
(53
|
)
|
|
|
(53
|
)
|
|
|
(160
|
)
|
|
|
(156
|
)
|
Depreciation and amortization
|
|
|
(79
|
)
|
|
|
(78
|
)
|
|
|
(240
|
)
|
|
|
(232
|
)
|
Non-operating pension and other post-retirement employee benefit income (cost)
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
2
|
|
|
|
5
|
|
Exchange (losses) gains, net
|
|
|
(9
|
)
|
|
|
5
|
|
|
|
(28
|
)
|
|
|
2
|
|
Restructuring, asset-related, and other charges (1)
|
|
|
(9
|
)
|
|
|
(34
|
)
|
|
|
(37
|
)
|
|
|
(49
|
)
|
Gain on sales of assets and businesses (2)
|
|
|
—
|
|
|
|
9
|
|
|
|
—
|
|
|
|
11
|
|
Transaction costs
|
|
|
—
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
(1
|
)
|
Legal and environmental charges (3)
|
|
|
(1
|
)
|
|
|
(5
|
)
|
|
|
(12
|
)
|
|
|
(43
|
)
|
Income before income taxes
|
|
$
|
60
|
|
|
$
|
91
|
|
|
$
|
156
|
|
|
$
|
330
|
|
|
(1)
|
Includes restructuring, asset-related, and other charges, which are discussed in further detail in “Note 5 – Restructuring, Asset-related, and Other Charges”.
|
|
(2)
|
For the three and nine months ended September 30, 2019, the Company recognized a non-cash gain of $9 related to the sale of its Repauno, New Jersey Site.
|
|
(3)
|
Legal charges pertains to litigation settlements, PFOA drinking water treatment accruals, and other legal charges. Environmental charges pertains to management’s assessment of estimated liabilities associated with on-site remediation, off-site groundwater remediation, and toxicity studies related to Fayetteville. The nine months ended September 30, 2020 includes $8 based on the aforementioned assessment associated with certain estimated liabilities at Fayetteville. The three and nine months ended September 30, 2019 include $2 and $36, respectively, for the approved final Consent Order associated with certain matters at Fayetteville. See “Note 17 – Commitments and Contingent Liabilities” for further details.
|
40
The Chemours Company