Published: 2023-07-28 00:00:00 ET

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

 

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

 

For the quarterly period ended June 30, 2023

OR

 

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

 

Commission File Number 001-36794

 

The Chemours Company

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware	46-4845564
(State or other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

1007 Market Street, Wilmington, Delaware 19801

(Address of Principal Executive Offices)

(302) 773-1000

(Registrant’s Telephone Number)

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

Title of Each Class		Trading Symbol(s)		Name of Exchange on Which Registered
Common Stock ($0.01 par value)		CC		New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer ☒	Accelerated Filer ☐
Non-Accelerated Filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrant had 148,077,055 shares of common stock, $0.01 par value, outstanding at July 24, 2023.

 

 

 

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The Chemours Company

 

 

TABLE OF CONTENTS
		Page
Part I	Financial Information
Item 1.	Interim Consolidated Financial Statements	2
	Interim Consolidated Statements of Operations (Unaudited)	2
	Interim Consolidated Statements of Comprehensive (Loss) Income (Unaudited)	3
	Interim Consolidated Balance Sheets (Unaudited)	4
	Interim Consolidated Statements of Stockholders’ Equity (Unaudited)	5
	Interim Consolidated Statements of Cash Flows (Unaudited)	6
	Notes to the Interim Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	72
Item 4.	Controls and Procedures	73
Part II	Other Information
Item 1.	Legal Proceedings	74
Item 1A.	Risk Factors	75
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	78
Item 3.	Defaults Upon Senior Securities	79
Item 4.	Mine Safety Disclosures	79
Item 5.	Other Information	79
Item 6.	Exhibits	80
Signature		81

 

1

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PART I. FINANCIAL INFORMATION

 

Item 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

The Chemours Company

Interim Consolidated Statements of Operations (Unaudited)

(Dollars in millions, except per share amounts)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2023				2022				2023				2022
Net sales		$	1,643			$	1,915			$	3,179			$	3,679
Cost of goods sold			1,233				1,418				2,401				2,697
Gross profit			410				497				778				982
Selling, general, and administrative expense			779				254				903				395
Research and development expense			28				25				54				55
Restructuring, asset-related, and other charges			(1	)			1				15				12
Total other operating expenses			806				280				972				462
Equity in earnings of affiliates			13				16				25				28
Interest expense, net			(48	)			(40	)			(90	)			(82	)
Other (expense) income, net			(2	)			38				(1	)			44
(Loss) income before income taxes			(433	)			231				(260	)			510
(Benefit from) provision for income taxes			(57	)			30				(30	)			76
Net (loss) income			(376	)			201				(230	)			434
Less: Net income attributable to non-controlling interests			—				—				1				—
Net (loss) income attributable to Chemours		$	(376	)		$	201			$	(231	)		$	434
Per share data
Basic (loss) earnings per share of common stock		$	(2.52	)		$	1.29			$	(1.55	)		$	2.75
Diluted (loss) earnings per share of common stock			(2.52	)			1.26				(1.55	)			2.69

 

 

 

See accompanying notes to the interim consolidated financial statements.

2

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The Chemours Company

Interim Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

(Dollars in millions)

 

		Three Months Ended June 30,
		2023												2022
		Pre-tax				Tax				After-tax				Pre-tax				Tax				After-tax
Net (loss) income										$	(376	)										$	201
Other comprehensive income (loss):
Hedging activities:
Unrealized (loss) gain on net investment hedge		$	(10	)		$	3				(7	)		$	32			$	(8	)			24
Unrealized (loss) gain on cash flow hedge			(1	)			1				—				9				(1	)			8
Reclassifications to net income - cash flow hedge			(1	)			—				(1	)			(4	)			1				(3	)
Hedging activities, net			(12	)			4				(8	)			37				(8	)			29
Cumulative translation adjustment			33				—				33				(73	)			—				(73	)
Defined benefit plans:
Additions to accumulated other comprehensive income (loss):
Effect of foreign exchange rates			(1	)			—				(1	)			4				—				4
Reclassifications to net income:
Amortization of actuarial loss			2				(1	)			1				2				(1	)			1
Amortization of prior service gain			(1	)			—				(1	)			—				—				—
Defined benefit plans, net		$	—			$	(1	)			(1	)		$	6			$	(1	)			5
Other comprehensive income (loss)											24												(39	)
Comprehensive (loss) income											(352	)											162
Less: Comprehensive income attributable to non-controlling interests											—												—
Comprehensive (loss) income attributable to Chemours										$	(352	)										$	162
		Six Months Ended June 30,
		2023												2022
		Pre-tax				Tax				After-tax				Pre-tax				Tax				After-tax
Net (loss) income										$	(230	)										$	434
Other comprehensive income (loss):
Hedging activities:
Unrealized (loss) gain on net investment hedge		$	(23	)		$	6				(17	)		$	58			$	(14	)			44
Unrealized (loss) gain on cash flow hedge			(3	)			1				(2	)			18				(3	)			15
Reclassifications to net income - cash flow hedge			(11	)			1				(10	)			(6	)			1				(5	)
Hedging activities, net			(37	)			8				(29	)			70				(16	)			54
Cumulative translation adjustment			90				—				90				(77	)			—				(77	)
Defined benefit plans:
Additions to accumulated other comprehensive income (loss):
Effect of foreign exchange rates			(2	)			—				(2	)			7				—				7
Reclassifications to net income:
Amortization of actuarial loss			4				(1	)			3				4				(1	)			3
Amortization of prior service gain			(1	)			—				(1	)			(1	)			—				(1	)
Defined benefit plans, net		$	1			$	(1	)			—			$	10			$	(1	)			9
Other comprehensive income (loss)											61												(14	)
Comprehensive (loss) income											(169	)											420
Less: Comprehensive income attributable to non-controlling interests											1												—
Comprehensive (loss) income attributable to Chemours										$	(170	)										$	420

 

 

 

 

See accompanying notes to the interim consolidated financial statements.

3

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The Chemours Company

Interim Consolidated Balance Sheets (Unaudited)

(Dollars in millions, except per share amounts)

 

		June 30, 2023				December 31, 2022
Assets
Current assets:
Cash and cash equivalents		$	738			$	1,102
Restricted cash and restricted cash equivalents			207				—
Accounts and notes receivable, net			890				626
Inventories			1,446				1,404
Prepaid expenses and other			64				82
Assets held for sale			29				—
Total current assets			3,374				3,214
Property, plant, and equipment			9,548				9,387
Less: Accumulated depreciation			(6,358	)			(6,216	)
Property, plant, and equipment, net			3,190				3,171
Operating lease right-of-use assets			244				240
Goodwill			102				102
Other intangible assets, net			8				13
Investments in affiliates			189				175
Restricted cash and restricted cash equivalents			—				202
Other assets			553				523
Total assets		$	7,660			$	7,640
Liabilities
Current liabilities:
Accounts payable		$	1,009			$	1,251
Compensation and other employee-related cost			78				121
Short-term and current maturities of long-term debt			25				25
Current environmental remediation			148				194
Other accrued liabilities			930				300
Total current liabilities			2,190				1,891
Long-term debt, net			3,604				3,590
Operating lease liabilities			196				198
Long-term environmental remediation			473				474
Deferred income taxes			58				61
Other liabilities			329				319
Total liabilities			6,850				6,533
Commitments and contingent liabilities
Equity
Common stock (par value $0.01 per share; 810,000,000 shares authorized; 196,759,211 shares issued and 148,229,690 shares outstanding at June 30, 2023; 195,375,810 shares issued and 148,504,030 shares outstanding at December 31, 2022)			2				2
Treasury stock, at cost (48,529,521 shares at June 30, 2023; 46,871,780 shares at December 31, 2022)			(1,790	)			(1,738	)
Additional paid-in capital			1,014				1,016
Retained earnings			1,864				2,170
Accumulated other comprehensive loss			(282	)			(343	)
Total Chemours stockholders’ equity			808				1,107
Non-controlling interests			2				—
Total equity			810				1,107
Total liabilities and equity		$	7,660			$	7,640

 

 

See accompanying notes to the interim consolidated financial statements.

4

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The Chemours Company

Interim Consolidated Statements of Stockholders’ Equity (Unaudited)

(Dollars in millions, except per share amounts)

 

		Common Stock								Treasury Stock								Additional Paid-in				Retained				Accumulated Other Comprehensive				Non-controlling
		Shares				Amount				Shares				Amount				Capital				Earnings				(Loss) Income				Interests				Total Equity
Balance at April 1, 2022			192,509,285			$	2			$	35,665,393			$	(1,393	)		$	956			$	1,940			$	(339	)		$	1			$	1,167
Common stock issued - compensation plans			3,717				—				—				—				—				—				—				—				—
Exercise of stock options, net			2,248,626				—				—				—				42				—				—				—				42
Purchases of treasury stock, at cost			—				—				3,523,566				(124	)			—				—				—				—				(124	)
Stock-based compensation expense			—				—				—				—				7				—				—				—				7
Net income			—				—				—				—				—				201				—				—				201
Dividends declared on common shares ($0.25 per share)			—				—				—				—				—				(39	)			—				—				(39	)
Other comprehensive loss			—				—				—				—				—				—				(39	)			—				(39	)
Balance at June 30, 2022			194,761,628			$	2				39,188,959			$	(1,517	)		$	1,005			$	2,102			$	(378	)		$	1			$	1,215
Balance at April 1, 2023			196,365,544			$	2				47,257,780			$	(1,751	)		$	1,004			$	2,278			$	(306	)		$	1			$	1,228
Common stock issued - compensation plans			3,443				—				—				—				—				—				—				—				—
Exercise of stock options, net			390,224				—				—				—				7				—				—				—				7
Purchases of treasury stock, at cost			—				—				1,271,741				(39	)			—				—				—				—				(39	)
Stock-based compensation expense			—				—				—				—				3				—				—				—				3
Net loss			—				—				—				—				—				(376	)			—				—				(376	)
Dividends declared on common shares ($0.25 per share)			—				—				—				—				—				(38	)			—				—				(38	)
Contributions by non-controlling interests			—				—				—				—				—				—				—				1				1
Other comprehensive income			—				—				—				—				—				—				24				—				24
Balance at June 30, 2023			196,759,211			$	2				48,529,521			$	(1,790	)		$	1,014			$	1,864			$	(282	)		$	2			$	810
		Common Stock								Treasury Stock								Additional Paid-in				Retained				Accumulated Other Comprehensive				Non-controlling
		Shares				Amount				Shares				Amount				Capital				Earnings				(Loss) Income				Interests				Total Equity
Balance at January 1, 2022			191,860,159			$	2				30,813,427			$	(1,247	)		$	944			$	1,746			$	(364	)		$	1			$	1,082
Common stock issued - compensation plans			295,736				—				—				—				—				—				—				—				—
Exercise of stock options			2,605,733				—				—				—				48				—				—				—				48
Purchases of treasury stock, at cost			—				—				8,375,532				(270	)			—				—				—				—				(270	)
Stock-based compensation expense			—				—				—				—				17				—				—				—				17
Cancellation of unissued stock awards withheld to cover taxes			—				—				—				—				(4	)			—				—				—				(4	)
Net income			—				—				—				—				—				434				—				—				434
Dividends declared on common shares ($0.50 per share)			—				—				—				—				—				(78	)			—				—				(78	)
Other comprehensive loss			—				—				—				—				—				—				(14	)			—				(14	)
Balance at June 30, 2022			194,761,628			$	2				39,188,959			$	(1,517	)		$	1,005			$	2,102			$	(378	)		$	1			$	1,215
Balance at January 1, 2023			195,375,810			$	2				46,871,780			$	(1,738	)		$	1,016			$	2,170			$	(343	)		$	—			$	1,107
Common stock issued - compensation plans			852,607				—				—				—				—				—				—				—				—
Exercise of stock options			530,794				—				—				—				9				—				—				—				9
Purchases of treasury stock, at cost			—				—				1,657,741				(52	)			—				—				—				—				(52	)
Stock-based compensation expense			—				—				—				—				7				—				—				—				7
Cancellation of unissued stock awards withheld to cover taxes			—				—				—				—				(18	)			—				—				—				(18	)
Net (loss) income			—				—				—				—				—				(231	)			—				1				(230	)
Dividends declared on common shares ($0.50 per share)			—				—				—				—				—				(75	)			—				—				(75	)
Contributions by non-controlling interests			—				—				—				—				—				—				—				1				1
Other comprehensive income			—				—				—				—				—				—				61				—				61
Balance at June 30, 2023			196,759,211			$	2				48,529,521			$	(1,790	)		$	1,014			$	1,864			$	(282	)		$	2			$	810

 

See accompanying notes to the interim consolidated financial statements.

5

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The Chemours Company

Interim Consolidated Statements of Cash Flows (Unaudited)

(Dollars in millions)

 

		Six Months Ended June 30,
		2023				2022
Cash flows from operating activities
Net (loss) income		$	(231	)		$	434
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization			157				146
Gain on sales of assets and businesses, net			—				(27	)
Equity in earnings of affiliates, net			(21	)			(23	)
Amortization of debt issuance costs and issue discounts			4				4
Deferred tax benefit			(71	)			(9	)
Asset-related charges			11				5
Stock-based compensation expense			7				17
Net periodic pension cost			4				4
Defined benefit plan contributions			(7	)			(7	)
Other operating charges and credits, net			(5	)			(8	)
Decrease (increase) in operating assets:
Accounts and notes receivable			(261	)			(339	)
Inventories and other operating assets			26				(86	)
(Decrease) increase in operating liabilities:
Accounts payable and other operating liabilities			329				182
Cash (used for) provided by operating activities			(58	)			293
Cash flows from investing activities
Purchases of property, plant, and equipment			(149	)			(168	)
Proceeds from sales of assets and businesses			—				33
Foreign exchange contract settlements, net			(8	)			(1	)
Other investing activities			—				(9	)
Cash used for investing activities			(157	)			(145	)
Cash flows from financing activities
Debt repayments			(6	)			(7	)
Payments on finance leases			(6	)			(6	)
Payments of debt issuance cost			—				(1	)
Purchases of treasury stock, at cost			(51	)			(272	)
Proceeds from exercised stock options, net			9				48
Payments related to tax withholdings on vested stock awards			(18	)			(4	)
Payments of dividends to the Company's common shareholders			(75	)			(78	)
Cash received from non-controlling interest shareholder			1				—
Cash used for financing activities			(146	)			(320	)
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents			2				(31	)
Decrease in cash, cash equivalents, restricted cash and restricted cash equivalents			(359	)			(203	)
Cash, cash equivalents, restricted cash and restricted cash equivalents at January 1,			1,304				1,551
Cash, cash equivalents, restricted cash and restricted cash equivalents at June 30,		$	945			$	1,348
Supplemental cash flows information
Non-cash investing and financing activities:
Purchases of property, plant, and equipment included in accounts payable		$	53			$	41
Treasury Stock repurchased, not settled			1				2

 

See accompanying notes to the interim consolidated financial statements.

6

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The Chemours Company

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

 

 

 

7

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The Chemours Company

Notes to the Interim Consolidated Financial Statements (Unaudited)

(Dollars in millions, except per share amounts)

 

 

 

 

8

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The Chemours Company

Notes to the Interim Consolidated Financial Statements (Unaudited)

(Dollars in millions, except per share amounts)

 

 

 

 

9

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The Chemours Company

Notes to the Interim Consolidated Financial Statements (Unaudited)

(Dollars in millions, except per share amounts)

 

 

 

 

11

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The Chemours Company

Notes to the Interim Consolidated Financial Statements (Unaudited)

(Dollars in millions, except per share amounts)

 

 

12

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The Chemours Company

Notes to the Interim Consolidated Financial Statements (Unaudited)

(Dollars in millions, except per share amounts)

 

 

 

 

 

13

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The Chemours Company

Notes to the Interim Consolidated Financial Statements (Unaudited)

(Dollars in millions, except per share amounts)

 

 

 

 

 

 

14

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The Chemours Company

Notes to the Interim Consolidated Financial Statements (Unaudited)

(Dollars in millions, except per share amounts)

 

 

 

 

 

 

 

 

15

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The Chemours Company

Notes to the Interim Consolidated Financial Statements (Unaudited)

(Dollars in millions, except per share amounts)

 

 

 

 

 

 

16

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The Chemours Company

Notes to the Interim Consolidated Financial Statements (Unaudited)

(Dollars in millions, except per share amounts)

 

 

 

 

18

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The Chemours Company

Notes to the Interim Consolidated Financial Statements (Unaudited)

(Dollars in millions, except per share amounts)

 

19

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The Chemours Company

Notes to the Interim Consolidated Financial Statements (Unaudited)

(Dollars in millions, except per share amounts)

 

 

 

 

 

36

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The Chemours Company

Notes to the Interim Consolidated Financial Statements (Unaudited)

(Dollars in millions, except per share amounts)

 

 

 

 

37

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The Chemours Company

Notes to the Interim Consolidated Financial Statements (Unaudited)

(Dollars in millions, except per share amounts)

 

Note 19. Stock-based Compensation

 

 

 

 

 

39

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The Chemours Company

Notes to the Interim Consolidated Financial Statements (Unaudited)

(Dollars in millions, except per share amounts)

 

 

 

42

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The Chemours Company

Notes to the Interim Consolidated Financial Statements (Unaudited)

(Dollars in millions, except per share amounts)

 

 

 

 

 

 

43

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The Chemours Company

Notes to the Interim Consolidated Financial Statements (Unaudited)

(Dollars in millions, except per share amounts)

 

Note 24. Segment Information

 

 

45

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The Chemours Company

 

 

 

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) supplements the unaudited Interim Consolidated Financial Statements and the related notes thereto included elsewhere herein to help provide an understanding of our financial condition, changes in our financial condition, and the results of our operations for the periods presented. 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 herein to “EID” refer to EIDP, Inc., formerly known as E. I. du Pont de Nemours and Company, which is our former parent company and is now a subsidiary of Corteva, Inc. (“Corteva”), a Delaware corporation. References herein to “DuPont” refer to DuPont de Nemours, Inc., a Delaware Corporation.

 

This MD&A should be read in conjunction with the unaudited Interim Consolidated Financial Statements and the related notes thereto included in Item 1 of this Quarterly Report on Form 10-Q, as well as our audited Consolidated Financial Statements and the related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022.

 

This section and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements, within the meaning of the federal securities laws, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. The words “believe”, “expect”, “anticipate”, “plan”, “estimate”, “target”, “project”, and similar expressions, among others, generally identify “forward-looking statements”, which speak only as of the date the statements were made. The matters discussed in these forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those set forth in the forward-looking statements.

 

Our forward-looking statements are based on certain assumptions and expectations of future events that may not be accurate or realized. These statements, as well as our historical performance, are not guarantees of future performance. Forward-looking statements also involve risks and uncertainties that are beyond our control. Additionally, there may be other risks and uncertainties that we are unable to identify at this time or that we do not currently expect to have a material impact on our business. Factors that could cause or contribute to these differences include, but are not limited to, the risks, uncertainties, and other factors discussed in the Forward-looking Statements and the Risk Factors sections in our Annual Report on Form 10-K for the year ended December 31, 2022, and as otherwise discussed in this report. We assume no obligation to revise or update any forward-looking statement for any reason, except as required by law.

 

 

Overview

 

We are a leading, global provider of performance chemicals that are key inputs in end-products and processes in a variety of industries. We deliver customized solutions with a wide range of industrial and specialty chemical products for markets, including coatings, plastics, refrigeration and air conditioning, transportation, semiconductor and consumer electronics, general industrial, and oil and gas. Our principal products include titanium dioxide (“TiO2”) pigment, refrigerants, industrial fluoropolymer resins, and performance chemicals and intermediates. We manage and report our operating results through three reportable segments: Titanium Technologies, Thermal & Specialized Solutions, and Advanced Performance Materials. Our 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. Our Thermal & Specialized Solutions segment is a leading, global provider of refrigerants, thermal management solutions, propellants, blowing agents, and specialty solvents. Our Advanced Performance Materials segment is a leading, global provider of high-end polymers and advanced materials that deliver unique attributes, including low friction coefficients, extreme temperature resistance, weather resistance, ultraviolet and chemical resistance, and electrical insulation. Our Performance Chemicals and Intermediates business is presented under Other Segment.

 

We are a different kind of chemistry company, driven by our vision to create a better world through the power of our chemistry. Our world-class product portfolio brings everyday convenience to virtually everything people touch in their daily lives, making our products and the solutions they enable both vital and essential. We are committed to creating value for our customers and stakeholders around the world through innovative and sustainable solutions, environmental leadership, community impact and making Chemours the greatest place to work for every employee. Our global workforce, renowned for its deep and unmatched expertise, bring our chemistry to life, guided by five core values that form the bedrock foundation for how we operate: (i) Customer Centricity – driving customer growth, and our own, by understanding our customers’ needs and building long-lasting relationships with them; (ii) Refreshing Simplicity – cutting complexity by investing in what matters, and getting results faster; (iii) Collective Entrepreneurship – empowering our employees to act like they own our business, while embracing the power of inclusion and teamwork; (iv) Safety Obsession – living our steadfast belief that a safe workplace is a profitable workplace; and, (v) Unshakable Integrity – doing what’s right for our customers, colleagues, and communities – always.

 

 

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We recognize that our responsibility to all stakeholders goes well beyond our Corporate Responsibility Commitment ("CRC") goals, and our commitment to sustainability cannot be separated from our growth strategy or our vision. As a result, in 2023 we are aligning our sustainability focus and actions to the four key strategic pillars that support our Chemours vision: Innovation and Sustainable Solutions, Environmental Leadership, Community Impact, and Greatest Place to Work for All. The four key areas support an effort to achieve, among other goals, increased sustainability of our products, addressing our carbon emissions, and increased diversity and inclusion in our global workforce. We call this responsible chemistry – it is rooted in who we are, and we expect that our CRC will drive sustainable, long-term earnings growth.

 

Our core values, together with our company purpose and vision, underpin our commitment to our stakeholders to make chemistry as responsible as it is essential. Sustainability is embedded within our growth strategy as a company, with 10 ambitious goals that we aim to achieve by 2030, built on our key strategic pillars of Innovation and Sustainable Solutions, Environmental Leadership, Community Impact, and Greatest Place to Work for All. These goals are designed to promote accountability to our commitment and position us for sustainable, long-term earnings growth. While we utilize environmental, social, and governance ("ESG") issue prioritization and a defined governance framework to manage sustainability, our goal is to embed sustainability into our organization and our business managing processes. We understand that maintaining safe, sustainable operations has an impact on us, our communities, the environment, and our collective future. With this focus, we invest in research and development (“R&D”) in order to develop safer, cleaner, and more efficient products and processes that enable our operations, customers, and consumers to reduce their greenhouse gas ("GHG") emissions, carbon footprint, and overall environmental footprint. We value collaboration to drive change and commit to continue working with policymakers, our value chain, and other organizations to encourage collective action to reduce GHG emissions and encourage lower-carbon forms of energy.

 

 

Recent Developments

 

United States Public Water System Class Action Suit Settlement

 

On June 1, 2023, we, Corteva/EID, and DuPont, together, entered into a binding agreement in principle to comprehensively resolve all drinking water claims related to PFAS of a defined class of U.S. public water systems that serve the vast majority of the United States population, arising out of the aqueous film forming foam multi-district litigation, that was finalized by a definitive agreement on June 30, 2023 (the "Settlement Agreement"), subject to approval by the United States District Court for the District of South Carolina (the “Court”). The motion for preliminary approval of the Settlement Agreement by the Court was filed on July 10, 2023.

Under the Settlement Agreement, we, Corteva and DuPont will collectively establish and contribute a total of $1.185 billion to a settlement fund (“Water District Settlement Fund”). Contribution rates will be consistent with the MOU, with us (together with our subsidiaries) contributing 50%, and DuPont and Corteva collectively (together with their subsidiaries) contributing the remaining 50%. The settlement amounts will be funded in full and deposited into the Water District Settlement Fund within ten business days following preliminary approval of the settlement by the Court. In exchange for the payment to the Water District Settlement Fund, we, Corteva and DuPont (together with their subsidiaries) will receive a complete release of the claims from the class, upon entry into final judgment by the Court in accordance with the Settlement Agreement. The agreement was entered into solely by way of compromise and settlement and is not in any way an admission of liability or fault by us or the other parties. For the quarter ended June 30, 2023, we accrued $592 million representing our share of the settlement, excluding legal fees. This matter is further described in “Note 17 – Commitments and Contingent Liabilities” to the Interim Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

 

Sale of Glycolic Acid Business

 

On June 1, 2023, we entered into a definitive agreement with PureTech Scientific Inc. to sell our Glycolic Acid business included in Other Segment for cash consideration of approximately $137 million, subject to customary working capital and other adjustments (the “Glycolic Acid Transaction”). As a result, at June 30, 2023, the related assets associated with the Glycolic Acid business disposal group of $29 million were classified as held for sale in the Interim Consolidated Balance Sheet in this Quarterly Report on Form 10-Q. The Glycolic Acid Transaction is expected to close in the third quarter of 2023, subject to customary closing conditions, including regulatory approvals. We expect to recognize a pre-tax gain on this transaction at closing.

 

 

 

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Results of Operations and Business Highlights

 

Results of Operations

 

The following table sets forth our results of operations for the three and six months ended June 30, 2023 and 2022.

 

		Three Months Ended June 30,								Six Months Ended June 30,
(Dollars in millions, except per share amounts)		2023				2022				2023				2022
Net sales		$	1,643			$	1,915			$	3,179			$	3,679
Cost of goods sold			1,233				1,418				2,401				2,697
Gross profit			410				497				778				982
Selling, general, and administrative expense			779				254				903				395
Research and development expense			28				25				54				55
Restructuring, asset-related, and other charges			(1	)			1				15				12
Total other operating expenses			806				280				972				462
Equity in earnings of affiliates			13				16				25				28
Interest expense, net			(48	)			(40	)			(90	)			(82	)
Other (expense) income, net			(2	)			38				(1	)			44
Income before income taxes			(433	)			231				(260	)			510
(Benefit from) provision for income taxes			(57	)			30				(30	)			76
Net (loss) income			(376	)			201				(230	)			434
Less: Net income attributable to non-controlling interests			—				—				1				—
Net (loss) income attributable to Chemours		$	(376	)		$	201			$	(231	)		$	434
Per share data
Basic (loss) earnings per share of common stock		$	(2.52	)		$	1.29			$	(1.55	)		$	2.75
Diluted (loss) earnings per share of common stock (1)			(2.52	)			1.26				(1.55	)			2.69

 

 

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Net Sales

 

The following table sets forth the impacts of price, volume, currency, and portfolio changes on our net sales for the three and six months ended June 30, 2023, compared with the same periods in 2022.

 

Change in net sales from prior period		Three Months Ended June 30, 2023				Six Months Ended June 30, 2023
Price			2	%			4	%
Volume			(16	)%			(17	)%
Currency			—	%			(1	)%
Total change in net sales			(14	)%			(14	)%

 

Our net sales decreased by $272 million (or 14%) to $1.6 billion for the three months ended June 30, 2023, compared with net sales of $1.9 billion for the same period in 2022. The decrease in our net sales for the three months ended June 30, 2023 was primarily attributable to a decrease in volume of 16%, partially offset by an increase in price of 2%. Volume decreased across all our reportable segments. Price increases were attributed to our Thermal & Specialized Solutions and Advanced Performance Materials segments.

 

Our net sales decreased by $500 million (or 14%) to $3.2 billion for the six months ended June 30, 2023, compared with net sales of $3.7 billion for the same period in 2022. The decrease in our net sales for the six months ended June 30, 2023 was primarily attributable to a decrease in volume of 17%, partially offset by an increase in price of 4%. Volume decreases were attributed to our Titanium Technologies and Advanced Performance Materials segments, partially offset by higher volume in our Thermal & Specialized Solutions segment. Price increased across all our reportable segments. Unfavorable currency movements across all our reportable segments added a net headwind of 1% to our net sales.

 

The key drivers of these changes for each of our reportable segments are discussed further under the “Segment Reviews” section within this MD&A.

 

Cost of Goods Sold

 

Our cost of goods sold (“COGS”) decreased by $185 million (or 13%) and $296 million (or 11%) to $1.2 billion and $2.4 billion for three and six months ended June 30, 2023, respectively, compared with COGS of $1.4 billion and $2.7 billion for the same periods in 2022. The decrease in our COGS for the three and six months ended June 30, 2023 was primarily attributable to lower sales volume, partially offset by higher raw material costs due to inflation and lower fixed cost absorption in our Titanium Technologies segment.

 

Selling, General, and Administrative Expense

 

Our selling, general, and administrative (“SG&A”) expense increased by $525 million (or over 100%) and $508 million (or over 100%) to $779 million and $903 million for the three and six months ended June 30, 2023, respectively, compared with SG&A expense of $254 million and $395 million for the same periods in 2022. The increase in our SG&A expense for the three and six months ended June 30, 2023 was primarily attributable to approximately $644 million of legal charges, which includes the $592 million of legal charges related to the Settlement Agreement. The increase was partially offset by lower off-site environmental remediation costs of approximately $109 million and $122 million at our Fayetteville Works site in Fayetteville, North Carolina ("Fayetteville") relative to the three and six months ended June 30, 2022, respectively.

 

Research and Development Expense

 

Our research and development (“R&D”) expense increased by $3 million (or 12%) and decreased by $1 million (or 2%) to $28 million and $54 million for the three and six months ended June 30, 2023, respectively, compared with R&D expense of $25 million and $55 million for the same periods in 2022. The increase in our R&D expense for the three months ended June 30, 2023 was primarily attributable to spending during the second quarter of 2023 related to certain projects that were previously delayed given macroeconomic conditions.

 

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Restructuring, Asset-Related, and Other Charges

 

Our restructuring, asset-related, and other charges were $(1) million and $15 million for the three and six months ended June 30, 2023, respectively, compared with restructuring, asset-related, and other charges of $1 million and $12 million for the three and six months ended June 30, 2022, respectively. Our restructuring, asset-related, and other charges in the six months ended June 30, 2023 were primarily attributable to charges of $16 million resulting from our decision to abandon the implementation of a new enterprise resource planning ("ERP") software platform. Our restructuring, asset-related, and other charges for the six months ended June 30, 2022 were primarily attributable to $5 million of asset charges resulting from our decision to suspend business with Russian entities due to the conflict between Russia and Ukraine, and $6 million of employee separation charges incurred in connection with our 2022 restructuring programs.

 

Equity in Earnings of Affiliates

 

Our equity in earnings of affiliates decreased by $3 million (or 19%) and $3 million (or 11%) to $13 million and $25 million for the three and six months ended June 30, 2023, respectively, compared with equity in earnings of affiliates of $16 million and $28 million for the same periods in 2022. The decrease in our equity in earnings of affiliates for the three and six months ended June 30, 2023 was primarily attributable to lower demand in the region where our investees' operate.

 

Interest Expense, Net

 

Our interest expense, net increased by $8 million (or 20%) and $8 million (or 10%) to $48 million and $90 million for the three and six months ended June 30, 2023, respectively, compared with interest expense, net of $40 million and $82 million for the same periods in 2022. The increase in our interest expense, net was primarily attributable to higher interest rates on our variable rate debt, partially offset by higher interest income. For the six months ended June 30, 2023 the comparative increase in interest expense, net was also partially offset by gain on interest rate swaps.

 

Other (Expense) Income, Net

 

Our other (expense) income, net increased by $40 million (or over 100%) and $45 million (or over 100%) to other expense, net of $2 million and $1 million for the three and six months ended June 30, 2023, respectively, compared with other income, net of $38 million and $44 million for the same periods in 2022. The decrease in our other income was primarily attributable to unfavorable changes in net exchange gains and losses, driven by the devaluation of the Argentine peso and the strengthening of the euro against the U.S. dollar. For the three and six months ended June, 30, 2022, we also recognized a net pre-tax gain on sale of $11 million and $18 million, respectively, associated with the sale of land at our former operating site in Beaumont, Texas (the "Beaumont Transaction") and the stock sale of certain of our wholly-owned subsidiaries and the remaining assets at our former Aniline business facilities in Pascagoula, Mississippi (the "Pascagoula Transaction").

 

(Benefit from) Provision for Income Taxes

 

We had a benefit from income taxes of $57 million and provision for $30 million for the three months ended June 30, 2023 and 2022, respectively, which represented effective tax rates of 13% in both periods. The $87 million decrease in our provision for income taxes for the three months ended June 30, 2023 was attributable to the tax benefit of $88 million associated with the Settlement Agreement in the second quarter of 2023. The decrease in profitability and changes in our geographic mix of earnings also contributed to the changes in provision for income taxes and the related effective tax rates.

 

We had a benefit from income taxes of $30 million and a provision for income taxes of $76 million for the six months ended June 30, 2023 and 2022, respectively, which represented effective tax rates of 11% and 15%, respectively. The $106 million decrease in our provision for income taxes and lower effective tax rate for the six months ended June 30, 2023 were primarily attributable to the same factors discussed in the preceding paragraph.

 

 

 

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Segment Reviews

 

Adjusted earnings before interest, taxes, depreciation, and amortization ("Adjusted EBITDA") is the primary measure of segment profitability used by our Chief Operating Decision Maker ("CODM") and is defined as income (loss) before income taxes, excluding the following:

 

A reconciliation of net income (loss) attributable to Chemours to Adjusted EBITDA for the three and six months ended June 30, 2023 and 2022 is included in the “Non-GAAP Financial Measures” section of this MD&A.

 

The following table sets forth our Adjusted EBITDA by segment for the three and six months ended June 30, 2023 and 2022.

 

		Three Months Ended June 30,								Six Months Ended June 30,
(Dollars in millions)		2023				2022				2023				2022
Titanium Technologies		$	87			$	216			$	156			$	422
Thermal & Specialized Solutions			214				213				399				387
Advanced Performance Materials			81				107				165				194
Other Segment			5				(2	)			15				(2	)
Corporate and Other			(63	)			(59	)			(107	)			(123	)
Total Adjusted EBITDA		$	324			$	475			$	628			$	878

 

 

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Titanium Technologies

 

The following table sets forth the net sales, Adjusted EBITDA, and Adjusted EBITDA margin amounts for our Titanium Technologies segment for the three and six months ended June 30, 2023 and 2022.

 

		Three Months Ended June 30,								Six Months Ended June 30,
(Dollars in millions)		2023				2022				2023				2022
Segment net sales		$	707			$	968			$	1,339			$	1,897
Adjusted EBITDA			87				216				156				422
Adjusted EBITDA margin			12	%			22	%			12	%			22	%

 

The following table sets forth the impacts of price, volume, currency, and portfolio changes on our Titanium Technologies segment’s net sales for the three and six months ended June 30, 2023, compared with the same periods in 2022.

 

Change in segment net sales from prior period		Three Months Ended June 30, 2023				Six Months Ended June 30, 2023
Price			—	%			2	%
Volume			(27	)%			(31	)%
Currency			—	%			—	%
Total change in segment net sales			(27	)%			(29	)%

 

Segment Net Sales

 

Our Titanium Technologies segment’s net sales decreased by $261 million (or 27%) to $707 million for the three months ended June 30, 2023, compared with segment net sales of $968 million for the same period in 2022. The decrease in segment net sales for the three months ended June 30, 2023 was primarily attributable to a decrease in volume of 27%. Volumes decreased due to softer market demand in all regions. Prices were flat in comparison to the prior period, as contractual price increases offset the decline in global flex and distribution channels. Currency was flat for the three months ended June 30, 2023 when compared to the same period of the prior year.

 

Our Titanium Technologies segment’s net sales decreased by $558 million (or 29%) to $1.3 billion for the six months ended June 30, 2023, compared with segment net sales of $1.9 billion for the same period in 2022. The decrease in segment net sales for the six months ended June 30, 2023 was primarily attributable to a decrease in volume of 31%, partially offset by an increase in price of 2%. Volumes decreased due to softer market demand in all regions. Prices increased primarily due to contractual price increases and actions to offset higher year-over-year inflation. Currency was flat for the six months ended June 30, 2023 when compared to the same period of the prior year.

 

Adjusted EBITDA and Adjusted EBITDA Margin

 

For the three months ended June 30, 2023, segment Adjusted EBITDA decreased by $129 million (or 60%) to $87 million and Adjusted EBITDA margin decreased by approximately 1,000 basis points to 12%, compared with segment Adjusted EBITDA of $216 million and Adjusted EBITDA margin of 22% for the same period in 2022. For the six months ended June 30, 2023, segment Adjusted EBITDA decreased by $266 million (or 63%) to $156 million and Adjusted EBITDA margin decreased by approximately 1,000 basis points to 12%, compared with segment Adjusted EBITDA of $422 million and Adjusted EBITDA margin of 22% for the same period in 2022. The decreases in segment Adjusted EBITDA and Adjusted EBITDA margin during the three and six months ended June 30, 2023 were primarily attributable to the aforementioned decrease in sales volumes, the effects of inflation on costs, and lower fixed cost absorption.

 

 

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Thermal & Specialized Solutions

 

The following table sets forth the net sales, Adjusted EBITDA, and Adjusted EBITDA margin amounts for our Thermal & Specialized Solutions segment for the three and six months ended June 30, 2023 and 2022.

 

		Three Months Ended June 30,								Six Months Ended June 30,
(Dollars in millions)		2023				2022				2023				2022
Segment net sales		$	523			$	518			$	1,009			$	943
Adjusted EBITDA			214				213				399				387
Adjusted EBITDA margin			41	%			41	%			40	%			41	%

 

The following table sets forth the impacts of price, volume, currency, and portfolio changes on our Thermal & Specialized Solutions segment’s net sales for the three and six months ended June 30, 2023, compared with the same periods in 2022.

 

Change in segment net sales from prior period		Three Months Ended June 30, 2023				Six Months Ended June 30, 2023
Price			2	%			3	%
Volume			(1	)%			4	%
Currency			—	%			—	%
Total change in segment net sales			1	%			7	%

 

Segment Net Sales

 

Our Thermal & Specialized Solutions segment’s net sales increased by $5 million (or 1%) to $523 million for the three months ended June 30, 2023, compared with segment net sales of $518 million for the same period in 2022. The increase in segment net sales for the three months ended June 30, 2023 was primarily attributable to an increase in price of 2%, partially offset by a decrease in volume of 1%. Prices increased across the portfolio, excluding automotive end markets, due to changing market and regulatory dynamics and steady value-based pricing growth within our Refrigerants and Foam, Propellants and Other Products portfolio. Volumes decreased slightly due to lower volumes for legacy refrigerants partially offset by increased demand for OpteonTM products. Currency was flat for the three months ended June 30, 2023 when compared to the same period of the prior year.

Our Thermal & Specialized Solutions segment’s net sales increased by $66 million (or 7%) to $1 billion for the six months ended June 30, 2023, respectively, compared with segment net sales of $943 million for the same period in 2022. The increase in segment net sales for the six months ended June 30, 2023 was primarily attributable to increases in volume of 4% and price of 3%. Volumes increased due to strong automotive original equipment manufacturer demand and continued adoption of OpteonTM products. Prices increased across the portfolio, excluding automotive end markets, due to changing market and regulatory dynamics and steady value-based pricing growth within our Refrigerants and Foam, Propellants and Other Products portfolio. Currency was flat for the six months ended June 30, 2023 when compared to the same period of the prior year.

Adjusted EBITDA and Adjusted EBITDA Margin

 

For the three months ended June 30, 2023, segment Adjusted EBITDA increased by $1 million (or less than 1%) to $214 million, compared with segment Adjusted EBITDA of $213 million for the same period in 2022. Adjusted EBITDA margin for the three months ended June 30, 2023 was in line with the same period of 2022 at 41%. For the six months ended June 30, 2023, segment Adjusted EBITDA increased by $12 million (or 3%) to $399 million and Adjusted EBITDA margin decreased by approximately 100 basis points to 40%, compared with segment Adjusted EBITDA of $387 million and Adjusted EBITDA margin of 41% for the same period in 2022. The increase in segment Adjusted EBITDA for the three months ended June 30, 2023, was primarily attributable to the aforementioned increase in price partially offset by lower legacy refrigerants volume. The increase in segment Adjusted EBITDA for the six months ended June 30, 2023 was primarily attributable to the aforementioned increase in sales volume and price, partially offset by higher raw material costs and lower earnings from our equity affiliates and other income. The decrease in Adjusted EBITDA margin during the six months ended June 30, 2023 was primarily attributable to the aforementioned higher raw material costs and lower earnings from our equity affiliates and other income.

 

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Advanced Performance Materials

 

The following table sets forth the net sales, Adjusted EBITDA, and Adjusted EBITDA margin amounts for our Advanced Performance Materials segment for the three and six months ended June 30, 2023 and 2022.

 

		Three Months Ended June 30,								Six Months Ended June 30,
(Dollars in millions)		2023				2022				2023				2022
Segment net sales		$	387			$	401			$	775			$	786
Adjusted EBITDA			81				107				165				194
Adjusted EBITDA margin			21	%			27	%			21	%			25	%

 

The following table sets forth the impacts of price, volume, currency, and portfolio changes on our Advanced Performance Materials segment’s net sales for the three and six months ended June 30, 2023, compared with the same periods in 2022.

 

Change in segment net sales from prior period		Three Months Ended June 30, 2023				Six Months Ended June 30, 2023
Price			7	%			9	%
Volume			(9	)%			(8	)%
Currency			(1	)%			(2	)%
Total change in segment net sales			(3	)%			(1	)%

 

Segment Net Sales

 

Our Advanced Performance Materials segment’s net sales decreased by $14 million (or 3%) and $11 million (or 1%) to $387 million and $775 million for the three and six months ended June 30, 2023, respectively, compared with segment net sales of $401 million and $786 million for the same period in 2022. The decreases in segment net sales for the three and six months ended June 30, 2023 were primarily attributable to a decreases in volume of 9% and 8%, respectively, partially offset by increases in price of 7% and 9%, respectively. Volumes decreased due to demand softening in the Advanced Materials portfolio which serves more economically sensitive end-markets and lower demand in non-strategic end-markets where some volume fade has been accelerated given our strategy to drive higher value, Performance Solutions product offerings. Prices increased due to increasing sales in high-value end-markets, including advanced electronics and clean energy, in the Performance Solutions portfolio, as well as pricing actions to offset higher raw material costs in our Advanced Materials portfolio. Unfavorable currency movements added a 1% and 2% headwind to the segment’s net sales during the three and six months ended June 30, 2023, respectively.

 

Our Performance Solutions portfolio’s net sales were $140 million and $284 million for the three and six months ended June 30, 2023, respectively, and $120 million and $240 million for the same period in 2022. Our Advanced Materials portfolio’s net sales were $247 million and $491 million for the three and six months ended June 30, 2023, respectively, and $281 million and $546 million for the same period in 2022.

 

Adjusted EBITDA and Adjusted EBITDA Margin

 

For the three months ended June 30, 2023, segment Adjusted EBITDA decreased by $26 million (or 24%) to $81 million and Adjusted EBITDA margin decreased by approximately 600 basis points to 21%, compared with segment Adjusted EBITDA of $107 million and Adjusted EBITDA margin of 27% for the same period in 2022. For the six months ended June 30, 2023, segment Adjusted EBITDA decreased by $29 million (or 15%) to $165 million and Adjusted EBITDA margin decreased by approximately 400 basis points to 21%, compared with segment Adjusted EBITDA of $194 million and Adjusted EBITDA margin of 25% for the same period in 2022. The decreases in segment Adjusted EBITDA and Adjusted EBITDA margin for the three and six months ended June 30, 2023 were primarily attributable to the aforementioned decreases in sales volume driving lower fixed cost absorption, impact of higher raw material costs, and the continued effects of inflation on other costs.

 

 

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Corporate and Other

 

Corporate and Other costs increased by $4 million (or 7%) and decreased by $16 million (or 13%) to $63 million and $107 million for the three and six months ended June 30, 2023, respectively, compared with Corporate and Other costs of $59 million and $123 million for the same periods in 2022. The increase in Corporate and Other costs for the three months ended June 30, 2023, was primarily attributable to higher legacy environmental and legal costs. The decrease in Corporate and Other costs for the six months ended June 30, 2023, was primarily attributable to lower legacy environmental costs and lower long-term performance-related compensation relative to the first half of 2022.

 

 

2023 Outlook

 

Our 2023 results will be driven by the following expectations in each of our reportable segments:

 

We expect that our capital expenditures will be approximately $400 million, with approximately $200 million for growth capital expenditures and approximately $200 million for run and maintain, and sustainability.

 

Our outlook for 2023 reflects our current visibility and expectations based on market factors, such as currency movements, macro-economic factors, and end-market demand. In particular, macro-economic factors may be impacted by factors beyond our control, including the ongoing Russia-Ukraine conflict. Our ability to meet our expectations are subject to numerous risks, including, but not limited to, those described in Item 1A – Risk Factors within our Annual Report on Form 10-K for the year ended December 31, 2022 and those updated in Item 1A – Risk Factors within this Quarterly Report on Form 10-Q for the period ended June 30, 2023.

 

 

Liquidity and Capital Resources

 

Our primary sources of liquidity are cash generated from operations and available cash, along with our receivables securitization and borrowings under our debt financing arrangements, which includes borrowing capacity under our revolving credit facility. Our operating cash flow generation is driven by, among other things, the general global economic conditions at any point in time and their resulting impacts on demand for our products, raw materials and energy prices, and industry-specific issues, such as production capacity and utilization. Despite the current challenging market conditions across the industry, we anticipate that through our cost efforts and growth initiatives, our operations will provide sufficient liquidity, together with the availability under our Revolving Credit Facility, to support the cash needs for the businesses. We have a historical pattern of seasonality, with working capital use of cash in the first half of the year, and a working capital source of cash in the second half of the year. We have generated strong operating cash flows through various past industry and economic cycles, evidencing the underlying operating strength of our businesses. The availability under our Revolving Credit Facility of $801 million as of June 30, 2023 is subject to the last 12 months of our consolidated EBITDA and senior secured net debt as defined under the Credit Agreement. Our debt financing arrangements are described in further detail in “Note 15 – Debt” to the Interim Consolidated Financial Statements in this Quarterly Report on Form 10-Q and “Note 20 – Debt” to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2022.

 

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Over the course of the next 12 months and beyond, we anticipate making significant cash payments for known contractual and other obligations, which we expect to fund through cash generated from operations, available cash, receivables securitization, and debt financing arrangements. Such obligations include principal and interest obligations on long-term debt, contractual obligations for operating and finance leases, purchase obligations, legal settlement agreements, and our expectations for capital expenditures, which, except as noted below, did not significantly change from what was previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022. Our contractual and other obligations also include:

 

We continue to believe our sources of liquidity are sufficient to fund our planned operations and to meet our interest, dividend, and contractual obligations, including the funding of the Water District Settlement Fund, through at least July 2024. Our financial policy seeks to: (i) selectively invest in organic and inorganic growth to enhance our portfolio, including certain strategic capital investments; (ii) maintain appropriate leverage by using free cash flows to repay outstanding borrowings; and, (iii) return cash to shareholders through dividends and share repurchases. Specific to our objective to return cash to shareholders, in recent quarters, we have previously announced dividends of $0.25 per share, amounting to approximately $150 million per year, and, on July 26, 2023, we announced our quarterly cash dividend of $0.25 per share for the third quarter of 2023. Under our share repurchase program, as further discussed in Item 2 –Unregistered Sales of Equity Securities and Use of Proceeds in this Quarterly Report on Form 10-Q, we also have remaining authority to repurchase $458 million of our outstanding common stock. The share repurchase program may be suspended or discontinued at any time. Subject to approval by our board of directors, we may raise additional capital or borrowings from time to time, or seek to refinance our existing debt. There can be no assurances that future capital or borrowings will be available to us, and the cost and availability of new capital or borrowings could be materially impacted by market conditions. Further, the decision to refinance our existing debt is based on a number of factors, including general market conditions and our ability to refinance on attractive terms at any given point in time. Any attempts to raise additional capital or borrowings or refinance our existing debt could cause us to incur significant charges. Such charges could have a material impact on our financial position, results of operations, or cash flows.

 

At June 30, 2023, we had total cash and cash equivalents of $738 million, of which $446 million was held by our foreign subsidiaries. All cash and cash equivalents held by our foreign subsidiaries is readily convertible into currencies used in our operations, including the U.S. dollar. During the six months ended June 30, 2023, we received approximately $174 million of net cash in the U.S. through intercompany dividends and loans. For further information related to our income tax positions, refer to “Note 9 – Income Taxes” to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2022.

 

 

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Cash Flows

 

The following table sets forth a summary of the net cash provided by (used for) our operating, investing, and financing activities for the six months ended June 30, 2023 and 2022.

 

		Six Months Ended June 30,
(Dollars in millions)		2023				2022
Cash (used for) provided by operating activities		$	(58	)		$	293
Cash used for investing activities			(157	)			(145	)
Cash used for financing activities			(146	)			(320	)

 

Operating Activities

 

We used $58 million in cash flows for, and generated $293 million in cash flows from our operating activities during the six months ended June 30, 2023 and 2022, respectively. The decrease in our operating cash inflows was primarily attributable to lower earnings, changes in net working capital, primarily due to higher payment of payables due to timing of inventory build and higher cost of raw materials, and higher spend at our Fayetteville site. These decreases were partially offset by lower incentive compensation payment in the first half of 2023 compared to the first half of 2022 and the one-time payment of the $25 million settlement with the State of Delaware in the first half of 2022 that did not recur in 2023.

 

Investing Activities

 

We used $157 million and $145 million in cash flows for our investing activities during the six months ended June 30, 2023 and 2022, respectively which were primarily attributable to purchases of property, plant, and equipment amounting to $149 million and $168 million, respectively. Cash outflows from investing activities during the six months ended June 30, 2022 were partially offset by $17 million of cash proceeds related to the Beaumont Transaction and $16 million of cash proceeds related to the Pascagoula Transaction.

 

Financing Activities

 

We used $146 million in cash flows for our financing activities during the six months ended June 30, 2023 which were primarily attributable to our capital allocation activities, resulting in $51 million in purchases of our issued and outstanding common stock under our 2022 Share Repurchase Program and $75 million of cash dividends.

 

We used $320 million in cash flows for our financing activities during the six months ended June 30, 2022 which were primarily attributable to our capital allocation activities, resulting in $272 million in purchases of our issued and outstanding common stock under our 2022 and 2018 Share Repurchase Programs and $78 million of cash dividends. These cash outflows were partially offset by $48 million of net proceeds from stock option exercises.

 

 

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Current Assets

 

The following table sets forth the components of our current assets at June 30, 2023 and December 31, 2022.

 

(Dollars in millions)		June 30, 2023				December 31, 2022
Cash and cash equivalents		$	738			$	1,102
Restricted cash and restricted cash equivalents			207				—
Accounts and notes receivable, net			890				626
Inventories			1,446				1,404
Prepaid expenses and other			64				82
Assets held for sale			29				—
Total current assets		$	3,374			$	3,214

 

Restricted cash and restricted cash equivalents of $207 million represents cash and cash equivalents deposited in an escrow account as per the terms of the MOU, and it was classified as a current asset at June 30, 2023 in line with the expected timing of funding the Settlement Agreement.

 

Our accounts and notes receivable, net increased by $264 million (or 42%) to $890 million at June 30, 2023, compared with accounts and notes receivable, net of $626 million at December 31, 2022. This increase in our accounts and notes receivable, net at June 30, 2023 was primarily attributable to the timing of collections from our customers and higher sales in the second quarter of 2023 driving higher receivables when compared to the fourth quarter of 2022, partially offset by the increased utilization of our Securitization Facility.

 

Our inventories increased by $42 million (or 3%) to $1.4 billion at June 30, 2023, compared with inventories of $1.4 billion at December 31, 2022. The increase in our inventories at June 30, 2023 was primarily attributable to build-up of our finished product inventories within our Advanced Performance Materials business in anticipation of upcoming planned plant maintenance during the second half of 2023, along with an increase in the value of our raw material inventories due to higher raw material costs.

 

Our prepaid expenses and other decreased by $18 million (or 22%) to $64 million at June 30, 2023, compared with prepaid expenses and other of $82 million at December 31, 2022. The decreases in our prepaid expenses and other was primarily due to a decrease in our prepaid insurance premiums.

 

Assets held for sale of $29 million at June 30, 2023 relates to the sale of our Glycolic Acid business discussed further in "Note 3 - Acquisitions and Divestitures" to the Interim Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

 

 

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Current Liabilities

 

The following table sets forth the components of our current liabilities at June 30, 2023 and December 31, 2022.

 

(Dollars in millions)		June 30, 2023				December 31, 2022
Accounts payable		$	1,009			$	1,251
Compensation and other employee-related costs			78				121
Short-term and current maturities of long-term debt			25				25
Current environmental remediation			148				194
Other accrued liabilities			930				300
Total current liabilities		$	2,190			$	1,891

 

Our accounts payable decreased by $242 million (or 19%) to $1 billion at June 30, 2023 compared with accounts payable of $1.3 billion at December 31, 2022. The decrease in our accounts payable at June 30, 2023 was primarily attributable to the timing of vendor payments and lower purchases due to lower demand.

 

Our compensation and other employee-related costs decreased by $43 million (or 36%) to $78 million at June 30, 2023 compared with compensation and other employee-related costs of $121 million at December 31, 2022. The decrease in our compensation and other employee-related costs at June 30, 2023 was primarily attributable to decreased accruals for employee performance-based compensation following payout of 2022 employee performance-based compensation during the first quarter of 2023.

 

Our current environmental remediation decreased by $46 million (or 24%) to $148 million at June 30, 2023 compared with current environmental remediation of $194 million at December 31, 2022. The decrease in our current environmental remediation at June 30, 2023 was primarily attributable to the construction at Fayetteville following completion of the barrier wall and groundwater extraction and treatment systems to meet the requirements of the Consent Order (“CO”) from the North Carolina Department of Environmental Quality (the “NC DEQ”).

 

Our other accrued liabilities increased by $630 million (or over 100%) to $930 million at June 30, 2023 compared with other accrued liabilities of $300 million at December 31, 2022. The increase in our other accrued liabilities was primarily attributable to litigation and other legal accruals, including the $592 million accrual related to the Settlement Agreement. The litigation matters are further discussed in "Note 17 - Commitments and Contingent Liabilities" to the Interim Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

 

 

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Credit Facilities and Notes

 

Refer to “Note 15 – Debt” to the Interim Consolidated Financial Statements in this Quarterly Report on Form 10-Q and “Note 20 – Debt” to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of our credit facilities and notes.

 

Guarantor Financial Information

 

The following disclosures set forth summarized financial information and alternative disclosures in accordance with Rule 13-01 of Regulation S-X (“Rule 13-01”). These disclosures have been made in connection with certain subsidiaries' guarantees of the 4.000% senior unsecured notes due May 2026, which are denominated in euros and the 5.375% senior unsecured notes due May 2027 (collectively, the “Registered Notes”), which are registered under the Securities Act of 1933, as amended. Each series of the Registered Notes was issued by The Chemours Company (the “Parent Issuer”), and was fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the existing and future domestic subsidiaries of the Parent Issuer (together, the “Guarantor Subsidiaries”), subject to certain conditions, which are further discussed in “Note 20 – Debt” to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2022. The assets, liabilities, and operations of the Guarantor Subsidiaries primarily consist of those attributable to The Chemours Company FC, LLC, our primary operating subsidiary in the United States, as well as certain U.S.-based subsidiaries included in Exhibit 22 to this Quarterly Report on Form 10-Q. Each of the Guarantor Subsidiaries is 100% owned by the Company. None of our other subsidiaries, either direct or indirect, guarantee the Registered Notes (together, the “Non-Guarantor Subsidiaries”). Pursuant to the indentures governing the Registered Notes, the Guarantor Subsidiaries will be automatically released from those guarantees upon the occurrence of certain customary release provisions.

 

Our summarized financial information is presented on a combined basis, consisting of the Parent Issuer and Guarantor Subsidiaries (collectively, the “Obligor Group”), in accordance with the requirements under Rule 13-01, and is presented after the elimination of: (i) intercompany transactions and balances among the Parent Issuer and Guarantor Subsidiaries, and (ii) equity in earnings from and investments in the Non-Guarantor Subsidiaries.

 

(Dollars in millions)		Six Months Ended June 30, 2023
Net sales		$	2,143
Gross profit			452
Loss before income taxes			(415	)
Net loss			(367	)
Net loss attributable to Chemours			(367	)

 

(Dollars in millions)		June 30, 2023				December 31, 2022
Assets
Current assets (1,2,3)		$	1,766			$	1,553
Long-term assets (4,5)			3,197				3,485
Liabilities
Current liabilities (2)		$	1,940			$	1,554
Long-term liabilities			4,547				4,528

 

There are no significant restrictions that may affect the ability of the Guarantor Subsidiaries in guaranteeing the Parent Issuer’s obligations under our debt financing arrangements. While the Non-Guarantor Subsidiaries do not guarantee the Parent Issuer’s obligations under our debt financing arrangements, we may, from time to time, repatriate post-2017 earnings from certain of these subsidiaries to meet our financing obligations, as well.

 

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Supplier Financing

 

We maintain supply chain finance programs with several financial institutions. The available capacity under these programs can vary based on the number of investors and/or financial institutions participating in these programs at any point in time. See "Note 13 – Accounts Payable" to the Interim Consolidated Financial Statements for further details regarding supplier financing programs.

 

Off-Balance Sheet Arrangements

 

In March 2023, through a wholly-owned special purpose entity ("SPE"), we entered into the Third Amendment to the Purchase Agreement, as amended, under our Securitization Facility, which among other things, extends the term of the Purchase Agreement, increases the facility limit from $150 million to $175 million, replaces the interest rate benchmark from the London Interbank Offered Rate ("LIBOR") to the Secured Overnight Financing Rate ("SOFR"), and adds a conduit purchaser.

 

See "Note 15 – Debt" to the Interim Consolidated Financial Statements for further details regarding this off-balance sheet arrangement.

 

Historically, we have not made any payments to satisfy guarantee obligations; however, we believe we have the financial resources to satisfy these guarantees in the event required.

 

 

Critical Accounting Policies and Estimates

 

Our significant accounting policies are described in our MD&A and “Note 3 – Summary of Significant Accounting Policies” to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes to the critical accounting policies and estimates previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, except as described in “Note 2 – Recent Accounting Pronouncements” to the Interim Consolidated Financial Statements.

 

 

Recent Accounting Pronouncements

 

See “Note 2 – Recent Accounting Pronouncements” to the Interim Consolidated Financial Statements for a discussion about recent accounting pronouncements.

 

 

 

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Environmental Matters

 

Consistent with our values and our Environment, Health, Safety, and Corporate Responsibility policy, we are committed to preventing releases to the environment at our manufacturing sites to keep our people and communities safe, and to be good stewards of the environment. We are also subject to environmental laws and regulations relating to the protection of the environment. We believe that, as a general matter, our policies, standards, and procedures are properly designed to prevent unreasonable risk of harm to people and the environment, and that our handling, manufacture, use, and disposal of hazardous substances are in accordance with applicable environmental laws and regulations.

 

Environmental Remediation

 

In large part, because of past operations, operations of predecessor companies, or past disposal practices, we, like many other similar companies, have clean-up responsibilities and associated remediation costs, and are subject to claims by other parties, including claims for matters that are liabilities of EID and its subsidiaries that we may be required to indemnify pursuant to the Separation-related agreements executed prior to our separation from EID on July 1, 2015 (the “Separation”).

 

Our environmental liabilities include estimated costs, including certain accruable costs associated with on-site capital projects. The accruable costs relate to a number of sites for which it is probable that environmental remediation will be required, whether or not subject to enforcement activities, as well as those obligations that result from environmental laws such as CERCLA, RCRA, and similar federal, state, local, and foreign laws. These laws may require certain investigative, remediation, and restoration activities at sites where we conduct or EID once conducted operations or at sites where our generated waste was disposed. Our consolidated balance sheets at June 30, 2023 and December 31, 2022 include environmental remediation liabilities of $621 million and $668 million, respectively, relating to these matters, which, as discussed in further detail below, include $418 million and $465 million, respectively, for Fayetteville.

 

As remediation efforts progress, sites move from the investigation phase (“Investigation”) to the active clean-up phase (“Active Remediation”), and as construction is completed at Active Remediation sites, those sites move to the operation, maintenance, and monitoring (“OM&M”), or closure phase. As final clean-up activities for some significant sites are completed over the next several years, we expect our annual expenses related to these active sites to decline over time. The time frame for a site to go through all phases of remediation (Investigation and Active Remediation) may take about 15 to 20 years, followed by several years of 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 (“PRPs”). In addition, for claims that we may be required to indemnify EID pursuant to the Separation-related agreements, we and EID may have limited available information for certain sites or are in the early stages of discussions with regulators. For these sites, 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, we currently estimate the potential liabilities may range up to approximately $730 million above the amount accrued at June 30, 2023. This estimate is not intended to reflect an assessment of our maximum potential liability. The estimated liabilities are determined based on existing remediation laws and technologies and our 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. We will continue to evaluate as new or additional information becomes available in the determination of our environmental remediation liability.

 

In general, uncertainty is greatest and the range of potential liability is widest in the Investigation phase, narrowing over time as regulatory agencies approve site remedial plans. As a result, uncertainty is reduced, and sites ultimately move into OM&M, as needed. As more sites advance from Investigation to Active Remediation to OM&M or closure, the upper end of the range of potential liability is expected to decrease over time. Some remediation sites will achieve site closure and will require no further action to protect people and the environment and comply with laws and regulations. At certain sites, we expect that there will continue to be some level of remediation activity due to ongoing OM&M of remedial systems. In addition, portfolio changes, such as an acquisition or divestiture, or notification as a PRP for a multi-party Superfund site, could result in additional remediation activity and potentially additional accrual.

 

Management does not believe that any loss, in excess of amounts accrued, related to remediation activities at any individual site will have a material impact on our financial position or cash flows for any given year, as such obligation can be satisfied or settled over many years.

 

 

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Significant Environmental Remediation Sites

 

While there are many remediation sites that contribute to our total accrued environmental remediation liabilities at June 30, 2023 and December 31, 2022, the following table sets forth the liabilities of the five sites that are deemed the most significant, together with the aggregate liabilities for all other sites.

 

(Dollars in millions)		June 30, 2023				December 31, 2022
Chambers Works, Deepwater, New Jersey		$	29			$	30
Fayetteville Works, Fayetteville, North Carolina			418				465
Pompton Lakes, New Jersey			41				41
USS Lead, East Chicago, Indiana			17				17
Washington Works, West Virginia			21				17
All other sites			95				98
Total environmental remediation		$	621			$	668

 

The five sites listed above represent 85% of our total accrued environmental remediation liabilities at June 30, 2023 and December 31, 2022. For these five sites, we expect to spend, in the aggregate, $200 million over the next three years. For all other sites, we expect to spend $58 million over the next three years.

 

Chambers Works, Deepwater, New Jersey (“Chambers Works”)

 

The Chambers Works complex is located on the eastern shore of the Delaware River in Deepwater, Salem County, New Jersey. The site comprises the former Carneys Point Works in the northern area and the Chambers Works manufacturing area in the southern area. Site operations began in 1892 when the former Carneys Point smokeless gunpowder plant was constructed at the northern end of Carneys Point. Site operations began in the manufacturing area around 1914 and included the manufacture of dyes, aromatics, elastomers, chlorofluorocarbons, and tetraethyl lead. We continue to manufacture a variety of fluoropolymers and finished products at Chambers Works. In addition, two tenants operate processes at Chambers Works. As a result of over 100 years of continuous industrial activity, site soils and groundwater have been impacted by chemical releases.

 

In response to identified groundwater contamination, a groundwater interceptor well system (“IWS”) was installed in 1970, which was designed to contain contaminated groundwater and restrict off-site migration. Additional remediation is being completed under a federal RCRA Corrective Action permit. The site has been studied extensively over the years, and more than 25 remedial actions have been completed to date and engineering and institutional controls put in place to ensure protection of people and the environment. In 2017, a site perimeter sheet pile barrier intended to more efficiently contain groundwater was completed.

 

Remaining work beyond continued operation of the IWS and groundwater monitoring includes completion of various targeted studies on site and in adjacent water bodies to close investigation data gaps, as well as selection and implementation of final remedies under RCRA Corrective Action for various solid waste management units and areas of concern not yet addressed through interim measures. Discussions are ongoing with the U.S. Environmental Protection Agency (the “EPA”) and the New Jersey Department of Environmental Protection (the “NJ DEP”) relating to such remaining work as well as the scope of remedial programs and investigation relating to the Chambers Works site historic industrial activity as well as ongoing remedial programs.

 

 

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Fayetteville Works, Fayetteville, North Carolina

 

Fayetteville is located southeast of the City of Fayetteville in Cumberland and Bladen counties, North Carolina. The facility encompasses approximately 2,200 acres, which were purchased by EID in 1970, and are bounded to the east by the Cape Fear River and to the west by North Carolina Highway 87. Currently, we manufacture fluorinated monomers, fluorinated vinyl ethers, NafionTM membranes and dispersions, and polymerization aids at the site. A former manufacturing area, which was sold in 1992, produced nylon strapping and elastomeric tape. EID sold its Butacite® and SentryGlas® manufacturing units to Kuraray America, Inc. in September 2014. In July 2015, upon our Separation from EID, we became the owner of the Fayetteville land assets along with fluoromonomers, NafionTM membranes, and the related polymerization aid manufacturing units. A polyvinyl fluoride resin manufacturing unit remained with EID.

 

Beginning in 1996, several stages of site investigation were conducted under oversight by NC DEQ, as required by the facility's hazardous waste permit. In addition, the site has voluntarily agreed to agency requests for additional investigations of the potential release of PFAS beginning with “PFOA” (collectively, perfluorooctanoic acids and its salts, including the ammonium salt) in 2006. As a result of detection of GenX in on-site groundwater wells during our investigations in 2017, NC DEQ issued a Notice of Violation (“NOV”) in September 2017 alleging violations of North Carolina water quality statutes and requiring further response. Since that time, and in response to three additional NOVs issued by NC DEQ and pursuant to the Consent Order (as discussed below), we have worked cooperatively with the agency to investigate and address releases of PFAS to on-site and off-site groundwater and surface water.

 

As discussed in “Note 17 – Commitments and Contingent Liabilities” to the Interim Consolidated Financial Statements, we, along with NC DEQ and Cape Fear River Watch (“CFRW”), a non-profit organization, have filed a final Consent Order (“CO”) that comprehensively addressed various issues, NOVs, and court filings made by NC DEQ regarding Fayetteville and resolved litigations filed by NC DEQ and CFRW. In connection with the CO, a thermal oxidizer became fully operational at the site in December 2019 to reduce aerial PFAS emissions from Fayetteville. The CO requires us to provide permanent replacement drinking water supplies, via connection to public water supply, whole building filtration units and/or reverse osmosis units, to qualifying surrounding residents, businesses, schools, and public buildings with private drinking water wells.

 

In 2020, we, along with NC DEQ and CFRW, reached agreement on the terms of an addendum to the CO (the “Addendum”). The Addendum establishes the procedure to implement specified remedial measures for reducing 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, or an extended date in accordance with the Addendum. In June 2023, we completed the construction of the barrier wall with a groundwater extraction and treatment system in accordance with the requirements under the CO, subject to receipt of final quality assurance samples, engineers certification and NC DEQ’s review.

 

Further discussion related to Fayetteville is included under the heading “Fayetteville Works, Fayetteville, North Carolina” in “Note 17 – Commitments and Contingent Liabilities” to the Interim Consolidated Financial Statements.

Pompton Lakes, New Jersey

 

During the 20th century, blasting caps, fuses, and related materials were manufactured at Pompton Lakes, Passaic County, New Jersey. Operating activities at the site were ceased in the mid-1990s. The primary contaminants in the soil and sediments are lead and mercury. Groundwater contaminants include volatile organic compounds. Under the authority of EPA and NJ DEP, remedial actions at the site are focused on investigating and cleaning-up the area. Groundwater monitoring at the site is ongoing, and we have installed and continue to install vapor mitigation systems at residences within the groundwater plume. In addition, we are further assessing groundwater conditions. In September 2015, EPA issued a modification to the site’s RCRA permit that requires us to dredge mercury contamination from a 36-acre area of the lake and remove sediment from two other areas of the lake near the shoreline. The remediation activities commenced when permits and implementation plans were approved in May 2016, and work on the lake dredging project is now complete. In April 2019, we submitted a revised Corrective Measures Study (“CMS”) proposing actions to address on-site soils impacted from past operations that exceed applicable clean-up criteria. We received comments on the CMS from EPA and NJ DEP in March 2020, and we responded to their comments in June 2020 and continue to seek resolution with EPA.

 

 

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U.S. Smelter and Lead Refinery, Inc., East Chicago, Indiana

 

The U.S. Smelter and Lead Refinery, Inc. (“USS Lead”) Superfund site is located in the Calumet neighborhood of East Chicago, Lake County, Indiana. The site includes the former USS Lead facility along with nearby commercial, municipal, and residential areas. The primary compounds of interest are lead and arsenic which may be found in soils within the impacted area. The EPA is directing and organizing remediation on this site, and we are one of a number of parties working cooperatively with EPA on the safe and timely completion of this work. EID’s former East Chicago manufacturing facility was located adjacent to the site, and EID assigned responsibility for the site to us in the Separation Agreement.

 

The USS Lead Superfund site was listed on the National Priorities List in 2009. To facilitate negotiations with PRPs, EPA divided the residential part of the USS Lead Superfund site into three zones, referred to as Zone 1, Zone 2, and Zone 3. The division into three zones resulted in Atlantic Richfield Co. (“Atlantic Richfield”) and EID entering into an agreement in 2014 with EPA and the State of Indiana to reimburse EPA’s costs to implement clean-up in Zone 1 and Zone 3. In March 2017, we and three other parties – Atlantic Richfield, EID, and the U.S. Metals Refining Co. (“U.S. Metals”) – entered into an administrative order on consent to reimburse EPA’s costs to clean-up a portion of Zone 2. In March 2018, EPA issued a Unilateral Administrative Order for the remainder of the Zone 2 work to five parties, including us, Atlantic Richfield, EID, U.S. Metals, and USS Lead Muller Group, and these parties entered into an interim allocation agreement to perform that work. As of the end of 2019, the required work in Zone 3 had been completed, and Zone 2 was nearly complete by the end of 2020. The determination of a final allocation for Zone 2 and/or the other Zones is ongoing, and additional PRPs may be identified.

 

The environmental accrual for USS Lead includes completion of the remaining obligations under the 2012 Record of Decision (“ROD”) and Statement of Work, which principally encompasses completion of Zone 1. The EPA released a proposed amendment to the 2012 ROD (the “ROD Amendment”) for a portion of Zone 1 in December 2018 (following its August 2018 Feasibility Study Addendum), with its recommended option based on future residential use. The EPA’s ROD Amendment for modified Zone 1 was released in March 2020, and selects as the preferred remedy one which requires a clean-up to residential standards based on the current applicable residential zoning. The ROD Amendment for modified Zone 1 also sets forth a selected contingent remedy which requires clean-up to commercial/industrial standards if the future land use becomes commercial/industrial. In November 2019, a Letter of Intent was executed by the City of East Chicago, Indiana and Industrial Development Advantage, LLC ("IDA"), relating to modified Zone 1 development, and EPA has indicated that it is “more likely” that future land use in this area will be commercial/industrial and not residential.

 

In 2021, we resolved the claims asserted by EPA related to past indirect costs associated with the 2012 ROD as amended, and the 2014 agreement entered into with EPA and the State of Indiana. In September 2022, EPA confirmed the selection of remedial actions for modified Zone 1 and provided notice to all relevant parties, including IDA, to cause the agreements between EPA, DOJ, the State of Indiana, us and other PRPs to become effective. We expect that our future costs relating to the USS Lead site will be contingent on implementation of these agreements, resolution of EPA’s costs as well as any final allocation between PRPs.

 

 

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Washington Works, Parkersburg, West Virginia (“Washington Works”)

The Washington Works complex is located on the eastern shore of the Ohio River south of Parkersburg, West Virginia. The facility encompasses approximately 400 acres, which were purchased by EID in the late 1940’s. Other nearby land parcels purchased by EID included Blennerhassett Island, and three separate properties where West Virginia Department of Environmental Protection ("WV DEP") permitted landfills were operated. Site operations began in 1948 and included the manufacture of nylon, filaments, and acrylics. In 1949, fluoropolymer manufacturing began, and in 1959, Delrin production was started. Landfill operations occurred from the 1960’s through the early 2000’s when all three were closed according to WV DEP approved closure plans. Beginning in 2014, EID no longer used PFOA as a polymerization aid to manufacture some fluoropolymer resins at Washington Works.

In July 2015, upon our separation from EID, we became the owner of the Washington Works complex. The site has implemented environmental investigations, including Verification Investigation in 1992 and RCRA Facility Investigation ("RFI") in 1999 pursuant to corrective action requirements of its RCRA Part B and HSWA Permit under EPA and the West Virginia Department of Natural Resources oversight. The RFI was approved in 2012 and a CMS was completed in 2015 that recommended certain remedial actions, including capping of the former on-site landfill and ponds, which had already been completed, sitewide groundwater hydraulic control, drinking water supply well treatment via granular activated carbon, and long-term groundwater monitoring. These actions were memorialized in a RCRA final remedy implementation plan approved by the agencies in 2018 and integrated into the updated RCRA permit in August 2020.

The remedial actions required by the RCRA final remedy implementation plan have been completed or are part of routine operations, maintenance and monitoring. Landfill post closure care includes systems to treat surface water, leachate or groundwater, landfill cover or cap maintenance, monitoring and reporting. Additionally, upgrades to the Local landfill cover are being developed. Accruals related to these remedial actions were $21 million and $17 million as of June 30, 2023 and December 31, 2022, respectively.

Chemours Washington Works discharges, through outfalls at the site, wastewater and stormwater pursuant to a National Pollutant Discharge Elimination System ("NPDES") permit issued by the WV DEP. In connection with actions being taken by us to comply with certain NPDES effluent limits, including for PFOA and hexafluoropropylene oxide dimer acid, we submitted a permit modification to WV DEP relating to groundwater abatement for certain process water used at the facility, a temperature reduction project and realigning discharge flows to certain outfalls. In July 2021, EPA provided a specific objection to the draft modification based on Clean Water Act (“CWA”) regulations and requirements. In August 2021, WV DEP issued a NPDES permit modification to provide for the start-up of an abatement unit at the facility and to extend compliance dates for certain limits to December 2021 due to delays from the COVID-19 pandemic. In September 2021, WV DEP issued a further NPDES modification, including for the operation of an abatement unit from the site’s Ranney Well, and the site is taking additional actions to reduce PFAS discharges associated with wet weather flows and continuing to assess future stormwater discharges and permitting. In April 2023, we agreed to an Administrative Order on Consent with EPA that includes additional sampling as well as a compliance analysis and implementation of actions to address PFOA and hexafluoropropylene oxide dimer acid (“HFPO Dimer Acid”) discharge exceedances that occurred following the outfall limits for these compounds coming into effect in January 2022. We expect to make future capital and other operating related expenditures at Washington Works in connection with this Consent Order.

Pursuant to an Order on Consent ("OC"), entered into by EID with EPA since 2006, we provide alternate drinking water supplies, via granular activated carbon ("GAC") treatment or other approved supply, to residential well owners and local public drinking water systems near the Washington Works complex whose PFOA concentration exceeds 70 parts per trillion. We also provide regular sampling and GAC change outs activities as per OC requirements. Accruals related to this matter were $15 million as of June 30, 2023 and December 31, 2022, and were included in Accrued Litigation liability in “Note 17 – Commitments and Contingent Liabilities” to the Interim Consolidated Financial Statements.

 

New Jersey Department of Environmental Protection Directives and Litigation

 

In March 2019, NJ DEP issued two Directives, one being a state-wide PFAS Directive, and filed four lawsuits against us and other defendants, including allegations relating to clean-up and removal costs at four sites including Chambers Works. In December 2021, a consolidated order was entered in the lawsuits granting, in part, and denying, in part a motion to dismiss or strike parts of the Second Amended Complaints. In January 2022, NJ DEP filed a motion for a preliminary injunction requiring EID and us to establish a remediation funding source (“RFS”) in the amount of $943 million for Chambers Works, the majority of which is for non-PFAS remediation items. Further discussion related to these matters is included in “Note 17 – Commitments and Contingent Liabilities” to the Interim Consolidated Financial Statements.

 

 

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Climate Change

 

Central to our CRC are our ten goals that we aim to achieve by 2030 that map to the United Nations Sustainable Development Goals. We recognize that our responsibility to all stakeholders goes well beyond our CRC goals, and our commitment to sustainability cannot be separated from our growth strategy or our vision. As a result, in 2023 we are aligning our sustainability focus and actions to the four key strategic pillars that support our Chemours vision: Innovation and Sustainable Solutions, Environmental Leadership, Community Impact, and Greatest Place to Work for All.

 

The Environmental Leadership pillar underlines our commitment to deliver essential solutions responsibly, without causing harm to the Earth. With a focus on the responsible treatment of climate, water, and waste, our shared planet 2030 goals are comprised of the following:

 

In 2021, we announced an update to our climate goals to better align our climate commitment with the Paris Accord and set us on a path to achieve net zero greenhouse gas emissions from our operations by 2050. In 2022, we announced our signed commitment with the Science Based Targets initiative (“SBTi”) to establish science-based targets for scopes 1, 2, and 3 GHG emissions.

 

As part of the Innovation and Sustainable Solutions pillar, we are reimagining our portfolio to offer solutions that are also safer, healthier, and more resilient for a world that demands more. We believe that climate change is an important global issue that presents both opportunities and challenges for our company, our partners, our customers, and our communities. Climate change matters for our company are likely to be driven by changes in physical and transition risk, such as regulations and/or public policy, and changes in technology and product demand. Our operations and business results are increasingly subject to evolving climate-related legislation and regulations, inclusive of restrictions on GHG emissions, cap and trade emissions trading systems, and taxes on GHG emissions, fuel, and energy, among other provisions. Such regulatory matters have led, and are expected to continue to lead, to subsequent developments in product technology and demand. This helps guide our investment decisions and drive growth in demand for low-carbon and energy-efficient products, manufacturing technologies, and services that facilitate adaptation to a changing climate. Our business segments conduct market trend impact assessments, continuously evaluate opportunities for existing and new products and are well-positioned to take advantage of opportunities that may arise from increased consumer demand for and/or legislation mandating or incentivizing the use of products and technologies necessary to achieve a low-carbon economy.

 

In our Thermal & Specialized Solutions segment, global regulations driving the phase-down of hydrofluorocarbons ("HFCs"), including the EU’s F-Gas Directive, the EU’s Mobile Air Conditioning Directive, and the recently enacted U.S. American Innovation and Manufacturing Act (“AIM”), promote the adoption and sale of our high performing Opteon™ products, which have lower global warming potential (“GWP”) and zero ozone-depletion footprint. Our Opteon™ portfolio has been developed to meet global regulations while maintaining or improving performance compared to the products they replace in refrigeration and cooling applications, such as food transportation, food and pharmaceutical/medical storage, food manufacturing and retail, automotive air conditioning, and residential and commercial building air conditioning. By the year 2025, we estimate that our low GWP products will eliminate an estimated 325 million tons of carbon dioxide equivalents on a global basis.

 

We are a proponent of the recently passed bipartisan AIM Act, that went into effect in 2022, and will begin the national phase-down of hydrofluorocarbons. We successfully completed an improvement project to significantly reduce emissions of HFC-23 at our Louisville, Kentucky manufacturing site. The project includes the design, custom-build and installation of proprietary technology to capture at least 99% of HFC-23 process emissions from the site. This project was operational as of October 2022 and we are completing compliance validation of the system under an extension granted by the EPA.

 

In our Advanced Performance Materials segment, our growth prospects in fluoropolymers are also enhanced by regulation driving the increasing demand for electric vehicles and high-performance, low-emission vehicles. Our fluoropolymers are critical to delivering high performance over a wide range of harsh operating conditions, enhancing passenger safety, improving emission controls and fuel economy, and enabling vehicle electrification and the shift to hydrogen-powered vehicles. We expect the use of our fluoropolymers in vehicles to increase, driven by the automotive industry’s trends toward energy efficiency and clean energy due to evolving emissions performance regulations and increasing adoption of electric vehicles. Our fluoropolymer technology supports growing market demand for clean hydrogen generation using water electrolyzers, energy storage in flow batteries, and hydrogen conversion to power fuel cell vehicles.

 

 

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In our Titanium Technologies business, we recently unveiled our new Ti-Pure™ Sustainability ("TS") product series, designed to advance our customers’ and company’s sustainability goals through TiO2 innovation. The product series includes enhanced product sustainability designations—including climate impact, circularity, resource efficiency, and health and wellness. The business is aligning its new product development pipeline to the same categories, ensuring all innovations align with critical customer and societal challenges, enable at-a-glance product sustainability comparisons, and ultimately help customers advance their sustainability goals. New TS innovations will be launched across market segments in 2023.

 

As an energy and emissions intensive company, our costs of complying with complex environmental laws and regulations, as well as internal and external voluntary programs, are significant and will continue to be significant for the foreseeable future. These laws and regulations may change and could become more stringent over time, which could result in significant additional compliance costs, increased costs of purchased energy or other raw materials, increased transportation costs, investments in, or restrictions on, our operations, installation or modification of GHG-emitting equipment, or additional costs associated with GHG emissions. Additionally, significant regional or national differences in approaches to the imposition of such regulations and restrictions could present competitive challenges or opportunities in a global marketplace. Currently, most of our global operating facilities are required to monitor and report their GHG emissions but may or may not be subject to programs requiring trading or emission controls. The EU Emission Trading System applies to our operating sites in that region. Furthermore, U.S. political administration could lead to additional federal regulation with respect to GHG emissions limits and/or other legislation that could impact our operations. By tracking and taking action to reduce our GHG emissions footprint through energy efficiency programs, increased use of renewable energy and focused GHG emissions reduction programs, we can decrease the potential future impact of these regulatory matters.

 

 

PFOA

 

See our discussion under the heading “PFOA” in “Note 17 – Commitments and Contingent Liabilities” to the Interim Consolidated Financial Statements.

 

 

GenX

 

In June 2019, the Member States Committee of the European Chemicals Agency (“ECHA”) voted to list HFPO Dimer Acid as a Substance of Very High Concern. The vote was based on Article 57(f) – equivalent level of concern having probable serious effects to the environment. This identification does not impose immediate regulatory restriction or obligations, but may lead to a future authorization or restriction of the substance. On September 24, 2019, we filed an application with the EU Court of Justice for the annulment of the decision of ECHA to list HFPO Dimer Acid as a Substance of Very High Concern. In February 2022, the General Court dismissed the annulment action and we have appealed such decision.

 

 

PFAS

 

Refer to our discussion in “Note 17 – Commitments and Contingent Liabilities” to the Interim Consolidated Financial Statements.

 

In May 2020, ECHA announced that five Member States (Germany, the Netherlands, Norway, Sweden, and Denmark) launched a call for evidence to inform a PFAS restriction proposal to restrict the manufacture, placing on the market and use of PFAS in the EU. In this regulatory process, more than 4,000 substances, including F-gases and fluoropolymers are being considered as part of this broad regulatory action. Companies producing or using PFAS, as well as selling mixture or products containing PFAS, were invited to provide input. This call for evidence closed July 31, 2020. Thousands of substances meet the definition of PFAS as outlined in the call for evidence. This very broad definition covers substances with a variety of physical and chemical properties, health and environmental profiles, uses, and benefits. We submitted information on the substances covered by the call for evidence to the Member State competent authority for Germany, which is the Federal Institute for Occupational Safety and Health (“BAuA”). On July 15, 2021, the countries submitted their restriction proposal, which informs ECHA of the intent to prepare a PFAS restriction dossier for fluorinated substances within a defined structural formula scope, including branched fluoroalkyl groups and substances containing ether linkages, fluoropolymers and side chain fluorinated polymers. The restriction dossier was submitted to ECHA in January 2023, and in February 2023 ECHA published a report and supporting annexes on the restriction proposal, which includes identified concerns for in-scope PFAS and their degradation products and the proposed restriction of a full ban with certain use-specific time-limited derogation periods. The restriction dossier will be reviewed by the ECHA Risk Assessment Committee ("RAC") and Socio-economic Analysis Committee (“SEAC”) and proposals submitted to the EU Commission in 2023. The estimated earliest entry into force of restrictions is 2025, contingent upon timely completion of the remaining steps in the EU Registration, Evaluation, Authorization, and Restriction of Chemicals (“REACH”) restriction process.

 

 

 

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Non-GAAP Financial Measures

 

We prepare our interim consolidated financial statements in accordance with generally accepted accounting principles in the U.S. (“GAAP”). To supplement our financial information presented in accordance with GAAP, we provide the following non-GAAP financial measures – Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings per Share (“EPS”), Free Cash Flows (“FCF”), Return on Invested Capital (“ROIC”), and Net Leverage Ratio – in order to clarify and provide investors with a better understanding of our performance when analyzing changes in our underlying business between reporting periods and provide for greater transparency with respect to supplemental information used by management in its financial and operational decision-making. We utilize Adjusted EBITDA as the primary measure of segment profitability used by our CODM.

 

Adjusted EBITDA is defined as income (loss) before income taxes, excluding the following:

 

Adjusted Net Income is defined as our net income (loss), adjusted for items excluded from Adjusted EBITDA, except interest expense, depreciation, amortization, and certain provision for (benefit from) income tax amounts. Adjusted EPS is calculated by dividing Adjusted Net Income by the weighted-average number of our common shares outstanding. Diluted Adjusted EPS accounts for the dilutive impact of our stock-based compensation awards, which includes unvested restricted shares. FCF is defined as our cash flows provided by (used for) operating activities, less purchases of property, plant, and equipment as shown in our consolidated statements of cash flows. ROIC is defined as Adjusted Earnings before Interest and Taxes (“Adjusted EBIT”), divided by the average of our invested capital, which amounts to our net debt, or debt less cash and cash equivalents, plus equity. Net Leverage Ratio is defined as our total debt principal outstanding less cash and cash equivalents, divided by Adjusted EBITDA.

 

We believe the presentation of these non-GAAP financial measures, when used in conjunction with GAAP financial measures, is a useful financial analysis tool that can assist investors in assessing our operating performance and underlying prospects. This analysis should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. In the future, we may incur expenses similar to those eliminated in this presentation. Our presentation of Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, FCF, ROIC, and Net Leverage Ratio should not be construed as an inference that our future results will be unaffected by unusual or infrequently occurring items. The non-GAAP financial measures we use may be defined differently from measures with the same or similar names used by other companies. This analysis, as well as the other information provided in this Quarterly Report on Form 10-Q, should be read in conjunction with the Interim Consolidated Financial Statements and notes thereto included in this report, as well as the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022.

 

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The following table sets forth a reconciliation of our net (loss) income attributable to Chemours to Adjusted Net Income, Adjusted EBITDA, and Adjusted EPS for the three and six months ended June 30, 2023 and 2022.

 

		Three Months Ended June 30,								Six Months Ended June 30,
(Dollars in millions, except per share amounts)		2023				2022				2023				2022
Net (loss) income attributable to Chemours		$	(376	)		$	201			$	(231	)		$	434
Non-operating pension and other post-retirement employee benefit income			—				(2	)			—				(3	)
Exchange losses, net			5				3				12				3
Restructuring, asset-related, and other charges (1)			(1	)			—				15				16
Gain on sales of assets and businesses			—				(26	)			—				(27	)
Qualified spend recovery (2)			(18	)			(13	)			(32	)			(27	)
Legal charges (3)			644				5				645				7
Environmental charges (4)			1				165				1				171
Adjustments made to income taxes (5)			—				(2	)			(4	)			(6	)
Benefit from income taxes relating to reconciling items (6)			(88	)			(29	)			(91	)			(28	)
Adjusted Net Income			167				302				315				540
Net income attributable to non-controlling interests			—				—				1				—
Interest expense, net			48				40				90				82
Depreciation and amortization			78				72				157				146
All remaining provision for income taxes			31				61				65				110
Adjusted EBITDA		$	324			$	475			$	628			$	878
Weighted-average number of common shares outstanding - basic			149,095,543				156,224,802				149,046,585				158,051,092
Dilutive effect of our employee compensation plans (7)			1,517,177				3,442,411				1,849,679				3,562,159
Weighted-average number of common shares outstanding - diluted			150,612,720				159,667,213				150,896,264				161,613,251
Per share data
Basic (loss) earnings per share of common stock (8)		$	(2.52	)		$	1.29			$	(1.55	)		$	2.75
Diluted (loss) earnings per share of common stock (7) (8)			(2.52	)			1.26				(1.55	)			2.69
Adjusted basic earnings per share of common stock (8)			1.11				1.93				2.11				3.42
Adjusted diluted earnings per share of common stock (7) (8)			1.10				1.89				2.08				3.34

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The following table sets forth a reconciliation of our cash flows provided by (used for) operating activities to FCF for the six months ended June 30, 2023 and 2022.

 

		Six Months Ended June 30,
(Dollars in millions)		2023				2022
Cash (used for) provided by operating activities		$	(58	)		$	293
Less: Purchases of property, plant, and equipment			(149	)			(168	)
Free Cash Flows		$	(207	)		$	125

 

The following table sets forth a reconciliation of Adjusted EBIT and average invested capital, and their nearest respective GAAP measures, to ROIC for the periods presented.

 

		Twelve Months Ended June 30,
(Dollars in millions)		2023				2022
Adjusted EBITDA (1)		$	1,111			$	1,557
Less: Depreciation and amortization (1)			(303	)			(300	)
Adjusted EBIT		$	808			$	1,257
		As of June 30,
(Dollars in millions)		2023				2022
Total debt, net (2)		$	3,629			$	3,680
Total equity			810				1,215
Less: Cash and cash equivalents			(738	)			(1,248	)
Invested capital, net		$	3,701			$	3,647
Average invested capital (3)		$	3,731			$	3,667
Return on Invested Capital			22	%			34	%

 

The following table sets forth a reconciliation of our total debt principal, cash and cash equivalents, and Adjusted EBITDA to Net Leverage Ratio.

 

		As of June 30,
(Dollars in millions)		2023				2022
Total debt principal		$	3,653			$	3,710
Less: Cash and cash equivalents			(738	)			(1,248	)
Total debt principal, net		$	2,915			$	2,462
		Twelve Months Ended June 30,
(Dollars in millions)		2023				2022
Adjusted EBITDA (1)		$	1,111			$	1,557
Net Leverage Ratio		2.6x				1.6x

 

 

 

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are exposed to changes in foreign currency exchange rates because of our global operations. As a result, we have assets, liabilities, and cash flows denominated in a variety of foreign currencies. We also have variable rate indebtedness, which subjects us to interest rate risk. Additionally, we are also exposed to changes in the prices of certain commodities that we use in production. Changes in these rates and commodity prices may have an impact on our future cash flows and earnings. We manage these risks through our normal operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. We do not enter into derivative financial instruments for trading or speculative purposes.

 

By using derivative financial instruments, we are subject to credit and market risk. The fair values of the derivative financial instruments are determined by using valuation models whose inputs are derived using market observable inputs, and reflect the asset or liability position as of the end of each reporting period. When the fair value of a derivative contract is positive, the counterparty owes us, thus creating a receivable risk for us. We are exposed to counterparty credit risk in the event of non-performance by counterparties to our derivative agreements. We minimize counterparty credit (or repayment) risk by entering into transactions with major financial institutions of investment grade credit ratings.

 

Our risk management programs and the underlying exposures are closely correlated, such that the potential loss in value for the risk management portfolio described above would be largely offset by the changes in the value of the underlying exposures. Refer to “Note 21 – Financial Instruments” to the Interim Consolidated Financial Statements for further information.

 

 

Foreign Currency Risks

 

We enter into foreign currency forward contracts to minimize the volatility in our earnings related to foreign exchange gains and losses resulting from remeasuring our monetary assets and liabilities that are denominated in non-functional currencies, and any gains and losses from the foreign currency forward contracts are intended to be offset by any gains or losses from the remeasurement of the underlying monetary assets and liabilities. These derivatives are stand-alone and, except as described below, have not been designated as a hedge. At June 30, 2023, we had 12 foreign currency forward contracts outstanding with an aggregate gross notional U.S. dollar equivalent of $264 million, the fair value of which amounted to less than $1 million. At December 31, 2022, we had 9 foreign currency forward contracts outstanding with an aggregate gross notional U.S. dollar equivalent of $180 million, the fair value of which amounted to negative $1 million. We recognized net losses of $1 million and $7 million for the three and six months ended June 30, 2023, respectively, and a net gain of $5 million and a net loss of $1 million for the three and six months ended June 30, 2022, respectively, within other income (expense), net related to our non-designated foreign currency forward contracts.

 

We enter into certain qualifying foreign currency forward contracts under a cash flow hedge program 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 our international subsidiaries that use the euro as their functional currency. At June 30, 2023, we had 133 foreign currency forward contracts outstanding under our cash flow hedge program with an aggregate notional U.S. dollar equivalent of $181 million, the fair value of which amounted to negative $3 million. At December 31, 2022, we had 153 foreign currency forward contracts outstanding under our cash flow hedge program with an aggregate notional U.S. dollar equivalent of $180 million, the fair value of which amounted to negative $2 million. We recognized pre-tax losses of $1 million and $3 million for the three and six months ended June 30, 2023, respectively, and a pre-tax gains of $6 million and $11 million for the three and six months ended June 30, 2022, respectively, within accumulated other comprehensive loss. For the three and six months ended June 30, 2023, $1 million and $7 million of gain was reclassified to the cost of goods sold from accumulated other comprehensive loss, respectively. For the three and six months ended June 30, 2022, $3 million and $6 million of gain was reclassified to the cost of goods sold from accumulated other comprehensive loss, respectively.

 

We designated our euro-denominated debt as a hedge of our net investment in certain of our international subsidiaries that use the euro as their functional currency in order 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. We recognized pre-tax losses of $10 million and $23 million for the three and six months ended June 30, 2023, respectively, and pre-tax gains of $32 million and $58 million for the three and six months ended June 30, 2022, respectively, on our net investment hedge within accumulated other comprehensive loss.

 

 

 

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Item 4. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures designed to provide reasonable assurance that the information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission (“SEC”). These controls and procedures also provide reasonable assurance that information required to be disclosed in such reports is accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), to allow timely decisions regarding required disclosures.

 

As of June 30, 2023, our CEO and CFO, together with management, conducted an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Based on that evaluation, the CEO and CFO have concluded that these disclosure controls and procedures are effective at the reasonable assurance level.

 

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

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PART II. OTHER INFORMATION

 

Item 1. LEGAL PROCEEDINGS

 

Legal Proceedings

 

We are subject to various legal proceedings, including, but not limited to, product liability, intellectual property, personal injury, commercial, contractual, employment, governmental, environmental and regulatory, anti-trust, and other such matters that arise in the ordinary course of business. In addition, we, by virtue of our status as a subsidiary of EID prior to the Separation, are subject to or required under the Separation-related agreements executed prior to the Separation to indemnify EID against various pending legal proceedings. Information regarding certain of these matters is set forth below and in “Note 17 – Commitments and Contingent Liabilities” to the Interim Consolidated Financial Statements. In the foregoing, we have excluded matters that we expect to result in sanctions of less than $1 million, if any.

 

 

Litigation

 

PFOA and PFAS: Environmental and Litigation Proceedings

 

For purposes of this report, the term “PFOA” means, collectively, perfluorooctanoic acid and its salts, including the ammonium salt, and does not distinguish between the two forms. The term “PFAS” means per- and polyfluoroalkyl substances. Information related to these and other litigation matters is included in “Note 17 – Commitments and Contingent Liabilities” to the Interim Consolidated Financial Statements.

 

Fayetteville, North Carolina

 

Actions related to Fayetteville, other than those by the State of North Carolina, as discussed in “Note 17 – Commitments and Contingent Liabilities” to the Interim Consolidated Financial Statements, are shown below.

 

In the U.S. District Court for the Eastern District of North Carolina:

 

In Bladen County, North Carolina:

 

 

 

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Environmental Proceedings

 

Dordrecht, Netherlands

 

In May 2020, we were notified of an alleged criminal offense related to the Netherlands’ Environmental Management Act and the Working Conditions Decree, regarding the use of PFOA during the pre-spin time period of June 1, 2008 to December 31, 2012. The investigation was initiated in the first quarter of 2016 by a public prosecutor. We believe that we have complied with all relevant laws, and we are in contact with the prosecutor.

 

In addition, in March 2022, the public prosecutor in The Netherlands has raised a matter related to an alleged infraction of Regulation (EU) 517/2014. Due to a reporting error, our Dordrecht Works facility exceeded its allocated or transferred quota of hydrofluorocarbons within the European market over several years. We implemented improvements to our reporting procedures and operated within the allocated quota. We paid a fine in the fourth quarter of 2022 and are in contact with the prosecutor regarding the matter.

 

Fayetteville, North Carolina

 

In February 2019, we received a Notice of Violation (“NOV”) from EPA, alleging certain Toxic Substances Control Act (“TSCA”) violations at Fayetteville. Matters raised in the NOV could have the potential to affect operations at Fayetteville. For this NOV, we responded to EPA in March 2019 and at this time management does not believe that a loss is probable related to this NOV. We have also received NOVs from the NC DEQ following entry of the CO, including in April 2020, January 2021, and August 2021, alleging violations relating to Fayetteville. We have responded to these matters and in April 2022 entered into a settlement agreement with NC DEQ with respect to the August 2021 NOV. We do not believe that a loss is probable related to the matters in the other NOVs. Further discussion related to these matters is included under the heading “Fayetteville Works, Fayetteville, North Carolina” in “Note 17 – Commitments and Contingent Liabilities” to the Interim Consolidated Financial Statements.

 

 

Item 1A. RISK FACTORS

 

Except for the updated risk factors set forth below, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

 

We are subject to extensive environmental and health and safety laws and regulations that may result in unanticipated loss or liability related to our current and past operations, and that may result in significant additional compliance costs or obligations, which in either case, could reduce our profitability or liquidity.

 

Our operations and production facilities are dependent upon attainment and renewal of requisite operating permits and are subject to extensive environmental and health and safety laws, regulations, and enforcements at national, international, and local levels in numerous jurisdictions, relating to pollution, protection of the environment, climate change, transporting and storing raw materials and finished products, storing and disposing of hazardous wastes, and product content and other safety concerns. Such laws include, but are not limited to:

 

 

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If we are found to be in violation of these laws, regulations, or enforcements, which may be subject to change based on legislative, scientific, or other factors, we may incur substantial costs, including fines, damages, criminal or civil sanctions, remediation costs, reputational harm, loss of sales or market access, or experience interruptions in our operations. Our operations and production may also be subject to changes based on increased regulation or other changes to, or restrictions imposed by, any such additional regulations. Any operational interruptions or plant shutdowns may result in delays in production or may cause us to incur additional costs to develop redundancies in order to avoid interruptions in our production cycles. In addition, the manner in which adopted regulations (including environmental and safety regulations) are ultimately implemented may affect our products, the demand for and public perception of our products, the reputation of our brands, our market access, and our results of operations. In the event of a catastrophic incident involving any of the raw materials we use or chemicals we produce, we could incur material costs to address the consequences of such event and future reputational costs associated with any such event.

 

Our costs to comply with complex environmental laws and regulations, as well as internal and external voluntary programs, are significant and will continue to be significant for the foreseeable future. These laws and regulations may change and could become more stringent over time, which could result in significant additional compliance costs, increased costs of purchased energy or other raw materials, increased transportation costs, investments in, or restrictions on, our operations, installation or modification of emission control equipment, or additional costs associated with emissions control equipment. As a result of our current and historic operations, including the operations of divested businesses and certain discontinued operations, we also expect to continue to incur costs for environmental investigation and remediation activities at a number of our current or former sites and third-party disposal locations. However, the ultimate costs under environmental laws and the timing of these costs are difficult to accurately predict. While we establish accruals in accordance with U.S. generally accepted accounting principles (“GAAP”), the ultimate actual costs and liabilities may vary from the accruals because the estimates on which the accruals are based depend on a number of factors (many of which are outside of our control), including the nature of the matter and any associated third-party claims, the complexity of the site, site geology, the nature and extent of contamination, the type of remedy, the outcome of discussions with regulatory agencies and other Potentially Responsible Parties (“PRPs”) at multi-party sites, and the number and financial viability of other PRPs. We also could incur significant additional costs as a result of additional contamination that is discovered or remedial obligations imposed in the future. Refer to “Environmental Matters” within Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations and “Note 17 – Commitments and Contingent Liabilities” to the Interim Consolidated Financial Statements for further information.

 

As discussed in “Note 17 – Commitments and Contingent Liabilities” to the Interim Consolidated Financial Statements, we continue to have active dialogue with the North Carolina Department of Environmental Quality (“NC DEQ”) and other stakeholders regarding potential remedies that are both economically and technologically feasible to achieve the objectives of the Consent Order (“CO”) and Addendum (“Addendum”) related to the discharge of HFPO Dimer Acid and PFAS from Fayetteville into the Cape Fear River, site surface water, groundwater, and air emissions. The Addendum establishes the procedure to implement specified remedial measures for reducing PFAS loadings from Fayetteville to the Cape Fear River, including construction of a barrier wall with a groundwater extraction system. The estimated liabilities of achieving the CO and Addendum objectives consist of several components, each of which may vary significantly and may exceed the recorded reserve estimates. The final costs of the barrier wall and groundwater treatment system will depend primarily on permitting, timely completion of construction based on the approved design, and actual labor and material costs. Unanticipated schedule delays or other factors beyond our control could lead to further increases in the cost of the barrier wall and groundwater treatment system, which could be material.

 

There is also a risk that one or more of our manufacturing processes, key raw materials, or products may be found to have, or be characterized or perceived as having, a toxicological or health-related impact on the environment or on our customers or employees or unregulated emissions, which could potentially result in us incurring liability in connection with such characterization and the associated effects of any toxicological or health-related impact. If such a discovery or characterization occurs, we may incur increased costs in order to comply with new regulatory requirements or as a result of litigation. In addition, the relevant materials or products, including products of our customers incorporating our materials or products, may be recalled, phased-out, or banned. Changes in laws, science, or regulations, or their interpretations, and our customers’ perception of such changes or interpretations may also affect the marketability of certain of our products.

 

In June 2019, the Member States Committee of the European Chemicals Agency ("ECHA") also voted to list HFPO Dimer Acid as a Substance of Very High Concern. The vote was based on Article 57(f) – equivalent level of concern having probable serious effects to the environment. This identification does not impose immediate regulatory restriction or obligations, but may lead to a future authorization or restriction of the substance. In September 2019, we filed an application with the EU Court of Justice for the annulment of the decision of ECHA to list HFPO Dimer Acid as a Substance of Very High Concern. In February 2022, the General Court dismissed the annulment action and we have appealed such decision.

 

 

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In May 2020, five European countries began an initiative to restrict the manufacture, placing on the market, and use of PFAS in the EU. In this regulatory process, more than 4,000 substances, including F-gases and fluoropolymers are being considered for potential broad regulatory action. On July 15, 2021, the countries submitted their restriction proposal, which informed ECHA of the intent to prepare a PFAS restriction dossier for fluorinated substances within a defined structural formula scope, including branched fluoroalkyl groups and substances containing ether linkages, fluoropolymers and side chain fluorinated polymers. The restriction dossier was submitted to ECHA in January 2023, and in February 2023 ECHA published a report and supporting annexes on the restriction proposal, which includes identified concerns for in-scope PFAS and their degradation products and the proposed restriction of a full ban with certain use-specific time-limited derogation periods. The restriction dossier will be reviewed by the ECHA Risk Assessment Committee ("RAC") and Socio-economic Analysis Committee (“SEAC”) and proposals submitted to the EU Commission in 2023. The estimated earliest entry into force of restrictions is 2025, contingent upon timely completion of the remaining steps in the EU REACH restriction process.

In the first quarter of 2023, the European Commission, the Parliament, and the Council, each proposed a regulation supporting the phase down of hydrofluorocarbons (“HFC”) by 2050 and multiple bans on HFCs and hydrofluoroolefin (“HFO”) in various applications. The proposed regulation is subject to negotiations and discussions amongst the European Commission, the Parliament, and the Council, and is expected to be finalized in the second half of 2023.

The impacts of these various restrictions and regulatory measures in the EU as noted above, individually and in the aggregate, could lead to material adverse effects on our results of operations, financial condition, and cash flows.

 

In October 2021, EPA released its PFAS Strategic Roadmap, identifying a comprehensive approach to addressing PFAS. The PFAS Strategic Roadmap sets timelines by which EPA plans to take specific actions through 2024, including establishing a national primary drinking water regulation ("NPDWR") for PFOA and perfluorooctanesulfonic acid (“PFOS”) and taking Effluent Limitations Guidelines actions to regulate PFAS discharges from industrial categories among other actions. As provided under its roadmap, EPA also released its National PFAS Testing Strategy, under which the agency will identify and select certain PFAS compounds for which it will require PFAS manufacturers to conduct testing pursuant to the TSCA orders. EPA has indicated that we will receive orders for certain of such compounds, including seven of the testing orders that will be issued for PFAS compounds alleged to be associated with Fayetteville. In June 2022, EPA issued its first TSCA Section 4(a)(2) order under this program to five recipients, including us and EID. In January 2023, EPA issued a second TSCA Section 4(a)(2) order to four recipients, including us and EID. The recipients of each test order formed a consortia to jointly meet with the EPA, respond to the order, conduct testing and share costs to execute testing as determined with EPA. The timing of the remaining TSCA orders is not determinable at this time. Additional costs could be incurred in connection with EPA's actions, which could be material.

 

Also in October 2021, EPA published a final toxicity assessment for GenX compounds that decreased the draft reference dose for GenX compounds based on EPA’s review of new studies and analyses. On March 18, 2022, we filed a petition to EPA requesting to withdraw and correct its toxicity assessment for GenX compounds, and this petition was denied by EPA on June 14, 2022. The next day, on June 15, 2022, EPA released health advisories for four PFAS, including interim updated lifetime drinking water health advisories for PFOA and PFOS, and final health advisories for GenX compounds, including HFPO Dimer Acid and another PFAS compound (PFBS). On July 13, 2022, we filed a Petition for Review of the GenX compounds health advisory. On March 13, 2023, EPA proposed a NPDWR to establish Maximum Contaminant Levels (MCL’s) for six PFAS, with PFOA and PFOS having MCLs as individual compounds (each proposed as 4 parts per trillion) and four other PFAS compounds, including HFPO Dimer Acid, having a hazard index approach limit on any mixture containing one or more of the compounds. The proposed PFAS NPDWR is subject to public comment until May 30, 2023. EPA anticipates finalizing the regulation by the end of 2023 and no action is required on the proposed NPDWR until it is final. Depending on the ultimate outcome of EPA’s actions, our estimated environmental remediation liabilities and accrued litigation could increase to meet any new drinking water standards, which could have a material adverse effect on our results of operations, financial condition, and cash flows.

 

 

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Adverse developments affecting the financial markets, including events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our business, financial condition, or results of operations.

Certain U.S. and non-U.S. financial institutions experienced crisis in the first quarter of 2023, resulting in disruption in the financial markets. While we do not foresee any concerns around our liquidity, events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or the financial services industry generally, or concerns about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. Although we assess our banking and customer relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate to finance our current and future business operations could be significantly impaired by factors that affect us, the financial services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry.

In addition, investor, regulatory, or other concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other obligations or result in breaches of our contractual obligations. Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our liquidity and our business, results of operations, financial condition, and cash flows.

 

 

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Issuer Purchases of Equity Securities

 

2022 Share Repurchase Program

 

On April 27, 2022, our board of directors approved a share repurchase program authorizing the purchase of shares of our issued and outstanding common stock in an aggregate amount not to exceed $750 million, plus any associated fees or costs in connection with our share repurchase activity (the “2022 Share Repurchase Program”). Under the 2022 Share Repurchase Program, shares of our common stock can be purchased in the open market from time to time, subject to management’s discretion, as well as general business and market conditions. Our 2022 Share Repurchase Program became effective on April 27, 2022 and is scheduled to continue through the earlier of its expiration on December 31, 2025 or the completion of repurchases up to the approved amount. The program may be suspended or discontinued at any time.

 

The following table sets forth the purchases of our issued and outstanding common stock under the programs for the three months ended June 30, 2023.

 

(Dollars in millions, except per share amounts)														Approximate
										Total Number				Dollar Value of
										of Shares				Shares That May
		Total Number								Purchased as Part				Yet be Purchased
		of Shares				Average Price				of Publicly				Under the Plans
		Purchased				Paid per Share				Announced				or Programs
Period		(1)				(2)				Plans or Programs				(2)
Month ended April 30, 2023			-			$	-				-			$	496
Month ended May 31, 2023			810,740				28.68				810,740				473
Month ended June 30, 2023			461,001				33.07				461,001				458
Total			1,271,741			$	30.27				1,271,741			$	458

 

Through June 30, 2023, we purchased a cumulative 9,892,055 shares of our issued and outstanding common stock under the 2022 Share Repurchase Program, which amounted to $292 million at an average share price of $29.55 per share. The aggregate amount of our common stock that remained available for purchase under the 2022 Share Repurchase Program at June 30, 2023 was $458 million.

 

 

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Item 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

Item 4. MINE SAFETY DISCLOSURES

 

Information regarding mine safety and other regulatory actions at our surface mines and/or mineral sands separation facilities in Starke, Florida, Jesup, Georgia, Nahunta, Georgia, and Offerman, Georgia, are included in Exhibit 95 to this Quarterly Report on Form 10-Q.

 

Item 5. OTHER INFORMATION

 

None.

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Item 6. EXHIBITS

 

Exhibit Number		Description
3.1		Company’s Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on July 1, 2015).
3.2		Company’s Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on July 1, 2015).
10.1		Settlement Agreement, dated June 30 2023, by and among The Chemours Company, The Chemours Company FC, LLC, DuPont de Nemours, Inc., Corteva Inc. and E. I. du Pont de Nemours and Company n/k/a EIDP, Inc.and representatives of certain U.S. public water systems as set out therein (incorporate by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on June 30, 2023).
22		List of Guarantor Subsidiaries.
31.1		Rule 13a-14(a)/15d-14(a) Certification of the Company’s Principal Executive Officer.
31.2		Rule 13a-14(a)/15d-14(a) Certification of the Company’s Principal Financial Officer.
32.1		Section 1350 Certification of the Company’s Principal Executive Officer. The information contained in this Exhibit shall not be deemed filed with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the registrant under the Securities Act of 1933, as amended.
32.2		Section 1350 Certification of the Company’s Principal Financial Officer. The information contained in this Exhibit shall not be deemed filed with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the registrant under the Securities Act of 1933, as amended.
95		Mine Safety Disclosures.
101		The following financial statements from the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2023 have been formatted in Inline XBRL: (i) the Interim Consolidated Statements of Operations (Unaudited); (ii) the Interim Consolidated Statements of Comprehensive Income (Unaudited); (iii) the Interim Consolidated Balance Sheets (Unaudited); (iv) the Interim Consolidated Statements of Stockholders’ Equity (Unaudited); (v) the Interim Consolidated Statements of Cash Flows (Unaudited); and, (vi) the Notes to the Interim Consolidated Financial Statements (Unaudited). These financial statements have been tagged as blocks of text and include detailed tags.
104		The cover page from the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2023, which has been formatted in Inline XBRL and included within Exhibit 101.

 

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	THE CHEMOURS COMPANY
	(Registrant)
	Date:	July 28, 2023
	By:	/s/ Jonathan Lock
		Jonathan Lock
		Senior Vice President, Chief Financial Officer
		(As Duly Authorized Officer and Principal Financial Officer)

 

 

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