8-K
Chemours Co (CC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
October 25, 2022
Date of Report (Date of Earliest Event Reported)
The Chemours Company
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 001-36794 | 46-4845564 |
|---|---|---|
| (State or Other Jurisdiction | (Commission | (I.R.S. Employer |
| Of Incorporation) | File Number) | Identification No.) |
1007 Market Street
Wilmington, Delaware 19801
(Address of principal executive offices)
Registrant’s telephone number, including area code: (302)
773-1000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| 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. | ☐ |
| --- | --- |
Item 2.02 Results of Operations and Financial Condition.
On October 25, 2022, The Chemours Company (the “Company”) issued a press release regarding its third quarter 2022 financial results. A copy of the press release is furnished hereto as Exhibit 99.1.
Item 7.01 Regulation FD Disclosure.
As previously announced, Chemours will hold a conference call and webcast on October 26, 2022, at 8:00 AM EDT. A transcript of the prepared remarks for the conference call is furnished hereto as Exhibit 99.2 and can be accessed by visiting the Events & Presentations page of Chemours’ investor website, investors.chemours.com. A webcast replay of the conference call will be available on the Chemours’ investor website.
Use of Website to Distribute Material Company Information
The Company’s investor website address is investors.chemours.com. Chemours uses its website as a channel of distribution for important company information. Important information, including press releases, analyst presentations and financial information regarding Chemours, is routinely posted on and accessible on the investor website. Chemours also uses its website to expedite public access to time-critical information regarding Chemours in lieu of distributing a press release or in advance of filing with the U.S. Securities and Exchange Commission disclosing the same information. Therefore, investors should look to the investor website for important and time-critical information. Visitors to the investor website can also register to receive automatic e-mail and other notifications alerting them when new information is made available on the website.
Importantly, transcripts and presentation materials for quarterly earnings conference calls will be made only on the investor website beginning with the release of Chemours’ annual financial results in early 2023. The materials will be referenced in the earnings release and made available on the investor website approximately simultaneously with the publication of the earnings release. At and after the release of annual financial results, Chemours does not intend to furnish transcripts and other earnings materials via Form 8-K.
The information furnished in Items 2.02 and 7.01 of this report on Form 8-K, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and it will not be deemed incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99.1 Press release dated October 25, 2022.
99.2 Prepared Remarks from Management dated October 25, 2022.
104 The cover page from this Current Report on Form 8-K, formatted in Inline XBRL.
SIGNATURES
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 hereunto duly authorized.
| THE CHEMOURS COMPANY | |
|---|---|
| By: | /s/ Sameer Ralhan |
| Sameer Ralhan | |
| Senior Vice President, Chief Financial Officer | |
| Date: | October 25, 2022 |
EX-99.1
EXHIBIT 99.1
The Chemours Company Reports Third Quarter 2022 Results
Continued strength in APM and TSS despite uncertain macroeconomic conditions
Wilmington, Del., October 25, 2022 -- The Chemours Company (“Chemours”) (NYSE: CC), a global chemistry company with leading market positions in Titanium Technologies, Thermal & Specialized Solutions, and Advanced Performance Materials, today announced its financial results for the third quarter 2022.
Third Quarter 2022 Results & Highlights
• Net Sales of $1.8 billion, up 6% year-over-year
• Net Income of $240 million with EPS of $1.52, up $0.25 year-over-year
• Adjusted Net Income* of $196 million with Adjusted EPS* of $1.24
• Adjusted EBITDA*of $363 million, down (2)% year-over-year
• Free Cash Flow of $229 million
• Completed $79 million of share repurchases in the quarter; and $351 million of repurchases year-to-date as of September 30, 2022
• Announced planned $200 million investment in Nafion™ manufacturing capacity to support green hydrogen growth
• Announced plans to enter into a Joint Venture with BWT/FUMATECH to develop heavy-duty fuel cell membranes, subject to regulatory approval
• On October 25, 2022, the Company's Board of Directors approved a fourth quarter dividend of $0.25 per share, consistent with the prior quarter
“Our Thermal & Specialized Solutions (TSS) and Advanced Performance Materials (APM) segments continued to deliver strong results despite macroeconomic headwinds and are both poised to set full-year records,” said Mark Newman, Chemours President and CEO. “In APM, we delivered our third straight record quarter and expect our announced Nafion™ capacity expansion and Joint Venture with BWT/FUMATECH supports long term growth in the hydrogen electrolyzer and fuel cell space. In TSS, we had a record 3Q for the business, and continue to lead the global transition to low-GWP thermal management solutions. Strength in APM and TSS drove the majority of our earnings, and helped to offset the headwinds in our Titanium Technologies (TT) segment. I’d like to thank all of our global employees for remaining focused on serving our customers and finishing the year strong in a time of increasing uncertainty.”
Third quarter 2022 Net Sales were $1.8 billion, 6% higher than the prior-year quarter. Price was a positive contributor to the improved results, up 18%, partially offset by lower volumes of (5)% and currency headwinds of (3)%, on a year-over-year basis. Portfolio change, driven by the sale of our Mining Solutions business in 2021, was a (4)% headwind on a year-over-year basis.
Third quarter Net Income was $240 million, resulting in EPS of $1.52, up $0.25 vs. the prior-year quarter. Adjusted Net Income was $196 million. Adjusted EPS was $1.24, down $(0.03), or approximately (2)% vs. the prior-year quarter. Adjusted EBITDA for the third quarter of 2022 declined (2)% to $363 million in comparison to $372 million in the prior-year third quarter. Price continued to be ahead of cost in the third quarter, partially offset by lower volumes of (9)% and currency headwinds of (10)%, or $(37) million headwind vs. the prior-year quarter due to a stronger USD.
* For information on our non-GAAP measures, please refer to the attached “Reconciliation of GAAP Financial Measures to non-GAAP Financial Measures (Unaudited)”
EXHIBIT 99.1
Titanium Technologies (TT)
Delivering high-quality Ti-Pure™ pigment through customer-centered innovation and sustainability leadership
In the third quarter, Titanium Technologies segment Net Sales were $877 million, down $(31) million, or (3)%, from $908 million in the prior-year quarter. Compared with the prior-year quarter, price increased 16%, offset by volume which declined by (16)%, and currency was a (3)% headwind. Price increases were primarily due to contractual price changes, whereas lower volumes reflect weakening market demand, particularly in Europe and Asia. Price was flat sequentially, while volume declined by (8)%, reflecting ongoing market weakness in the aforementioned regions. Currency was a slight (1)% headwind, over the prior-quarter. Segment Adjusted EBITDA was $137 million, down (38)% as compared to the prior-year quarter, resulting in a segment Adjusted EBITDA Margin of 16%. Adjusted EBITDA Margin decreased by (800) basis points, primarily driven by decrease in volume and higher raw material, energy and logistics costs.
Thermal & Specialized Solutions (TSS)
Driving innovation in low GWP thermal management solutions to support customer transitions to more sustainable products
The Thermal & Specialized Solutions segment delivered record third quarter financial results. Net Sales were $417 million, up $99 million, or 31%, from the prior-year quarter. Price contributed 25%, and volume increased 8%, while currency was a slight (2)% headwind. Price increased across the portfolio, excluding automotive end-markets, due to changing market and regulatory dynamics as well as steady value-based pricing growth through our refrigerants portfolio. Volume increased due to the continued adoption of Opteon™ low GWP refrigerants across nearly all regions and end-markets. Price and volume decreased (3)% and (16)% respectively, on a sequential basis. Sequential price and volume declines were primarily driven by regional mix associated with typical seasonal refrigerant demand trends. Segment Adjusted EBITDA improved $59 million, or 57%, to $162 million vs. the prior-year quarter, driven by the aforementioned increase in price and favorable product mix, partially offset by higher raw material costs. Third quarter Adjusted EBITDA Margin of 39% reflects healthy expansion from the prior-year quarter driven by strong pricing, volume and mix shift to higher margin applications.
Advanced Performance Materials (APM)
Creating a clean energy and advanced electronics powerhouse
The Advanced Performance Materials segment delivered record-breaking financial results for the third consecutive quarter. Segment Net Sales were $450 million vs. $356 million in the prior-year quarter, an increase of 26%. Price contributed 23%, and volume 9%, to the stronger results, while currency was a headwind of (6)%. Global average selling price increased due to increasing sales in high-value end-markets, including advanced electronics, semiconductors, and clean energy, as well as customer level pricing actions to offset increased raw material and energy costs. Volume increased due to higher global customer demand across key markets, partially offset by supply chain challenges and lower demand in non-strategic end-markets where fade had been anticipated given our strategy to drive higher value, differentiated product offerings. Sequentially, price increased by 4%, and volume rose 10%, reflective of strong demand for our specialized product offerings, while currency was a headwind of (2)%. Adjusted EBITDA of $112 million was up $36 million, or 47%, from the prior-year quarter, and Adjusted EBITDA Margin was 25%, representing a 400 basis point improvement over the prior-year period due to strong operating leverage, partially offset by higher raw material, energy costs in Europe, logistics costs, and growth investments.
APM continues to expand its presence in the growing Hydrogen Economy through strategic investments, including a planned $200 million investment to expand Nafion™ ion exchange materials technology platformcapacity and a recently announced plan to enter into a Joint Venture with BWT/FUMATECH to accelerate heavy-duty fuel cell (HDFC) membrane technology development, which is subject to regulatory approval.
EXHIBIT 99.1
Other Segment
The remaining Chemical Solutions business in Other Segment had Net Sales and Adjusted EBITDA in the third quarter 2022 of $33 million and $3 million, respectively.
Corporate and Other Activities
Corporate and Other was an offset to third quarter Adjusted EBITDA of $(51) million vs. $(42) million in the prior-year quarter. The increase over the prior year was driven by higher legacy legal costs and long-term performance-related compensation expenses.
Liquidity
As of September 30, 2022, consolidated gross debt was $3.6 billion. Debt, net of $1.2 billion cash, was $2.4 billion, resulting in a net leverage ratio of approximately 1.5 times on a trailing twelve-month Adjusted EBITDA basis. Total liquidity was $2.0 billion, comprised of $1.2 billion cash, and $0.8 billion of revolving credit facility capacity, net of outstanding letters of credit.
Cash provided by operating activities for the third quarter of 2022 was $301 million vs. $311 million in the prior-year quarter. Capital expenditures for the third quarter of 2022 were $72 million vs. $67 million in the prior-year third quarter. Free Cash Flow for the third quarter of 2022 was $229 million vs. $244 million in the prior-year quarter. During the quarter we repurchased various portions of our senior unsecured notes in the open market for $53 million and funded our $100 million escrow payment as per the MOU agreement. In the quarter, we repurchased $79 million of common stock, resulting in total year-to-date share repurchases of $351 million as of September 30, 2022.
Outlook
As previously announced, Adjusted EBITDA for FY 2022 is expected to be between $1.40 billion and $1.45 billion. Free Cash Flow is expected to be greater than $575 million.
Mr. Newman concluded, "Looking ahead, we believe we have the best assets, team, and strategy to continue to deliver strong performance through the economic cycle and create value for our stakeholders, despite the macroeconomic uncertainty. We remain focused on our four key priorities to enhance shareholder value, and on delivering another solid year of financial results.”
Conference Call
As previously announced, Chemours will hold a conference call and webcast exclusively for Q&A on October 26, 2022, at 8:00 AM Eastern Daylight Time. A transcript of the prepared remarks, the webcast, and additional presentation materials can be accessed by visiting the Events & Presentations page of Chemours' investor website, investors.chemours.com. A webcast replay of the conference call will be available on Chemours’ investor website.
About The Chemours Company
The Chemours Company (NYSE: CC) is a global leader in Titanium Technologies, Thermal & Specialized Solutions, and Advanced Performance Materials providing its customers with solutions in a wide range of industries with market-defining products, application expertise and chemistry-based innovations. We deliver customized solutions with a wide range of industrial and specialty chemicals products for markets, including coatings, plastics, refrigeration and air conditioning, transportation, semiconductor and consumer electronics, general industrial, and oil and gas. Our flagship products include prominent brands such as Ti-Pure™, Opteon™, Freon™, Teflon™, Viton™, Nafion™, and Krytox™. The company has approximately 6,400 employees and 29 manufacturing sites serving approximately 3,200 customers in approximately 120 countries. Chemours is headquartered in Wilmington, Delaware and is listed on the NYSE under the symbol CC.
For more information, we invite you to visit chemours.com or follow us on Twitter @Chemours or LinkedIn.
EXHIBIT 99.1
Non-GAAP Financial Measures
We prepare our financial statements in accordance with Generally Accepted Accounting Principles (GAAP). Within this press release, we may make reference to Adjusted Net Income, Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Adjusted Effective Tax Rate, Return on Invested Capital and Net Leverage Ratio which are non-GAAP financial measures. The company includes these non-GAAP financial measures because management believes they are useful to investors in that they provide for greater transparency with respect to supplemental information used by management in its financial and operational decision making.
Management uses Adjusted Net Income, Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Adjusted Effective Tax Rate, Return on Invested Capital and Net Leverage Ratio to evaluate the company's performance excluding the impact of certain noncash charges and other special items which we expect to be infrequent in occurrence in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter.
Accordingly, the company believes 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 the company's 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. This analysis, as well as the other information in this press release, should be read in conjunction with the company's financial statements and footnotes contained in the documents that the company files with the U.S. Securities and Exchange Commission. The non-GAAP financial measures used by the company in this press release may be different from the methods used by other companies. For more information on the non-GAAP financial measures, please refer to the attached schedules or the table, "Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures" and materials posted to the company's website at investors.chemours.com.
EXHIBIT 99.1
Forward-Looking Statements
This press release contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which 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 a historical or current fact. The words "believe," "expect," "will," "anticipate," "plan," "estimate," "target," "project" and similar expressions, among others, generally identify "forward-looking statements," which speak only as of the date such statements were made. These forward-looking statements may address, among other things, the outcome or resolution of any pending or future environmental liabilities, the commencement, outcome or resolution of any regulatory inquiry, investigation or proceeding, the initiation, outcome or settlement of any litigation, changes in environmental regulations in the U.S. or other jurisdictions that affect demand for or adoption of our products, anticipated future operating and financial performance for our segments individually and our company as a whole, business plans, prospects, targets, goals and commitments, capital investments and projects and target capital expenditures, plans for dividends or share repurchases, sufficiency or longevity of intellectual property protection, cost reductions or savings targets, plans to increase profitability and growth, our ability to make acquisitions, integrate acquired businesses or assets into our operations, and achieve anticipated synergies or cost savings, all of which are subject to substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Forward-looking statements are based on certain assumptions and expectations of future events that may not be accurate or realized. These statements are not guarantees of future performance. Forward-looking statements also involve risks and uncertainties that are beyond Chemours' control. In addition, the current COVID-19 pandemic has significantly impacted the national and global economy and commodity and financial markets, which has had and we expect will continue to have a negative impact on our financial results. The full extent and impact of the pandemic is still being determined and to date has included significant volatility in financial and commodity markets and a severe disruption in economic activity. The public and private sector response has led to travel restrictions, temporary business closures, quarantines, stock market volatility, and interruptions in consumer and commercial activity globally. Matters outside our control have affected our business and operations and may or may continue to hinder our ability to provide goods and services to customers, cause disruptions in our supply chains, adversely affect our business partners, significantly reduce the demand for our products, adversely affect the health and welfare of our personnel or cause other unpredictable events. Additionally, there may be other risks and uncertainties that Chemours is unable to identify at this time or that Chemours does not currently expect to have a material impact on its business. Factors that could cause or contribute to these differences include the risks, uncertainties and other factors discussed in our filings with the U.S. Securities and Exchange Commission, including in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 and in our Annual Report on Form 10-K for the year ended December 31, 2021. Chemours assumes no obligation to revise or update any forward-looking statement for any reason, except as required by law.
EXHIBIT 99.1
CONTACTS:
INVESTORS Jonathan Lock SVP, Chief Development Officer +1.302.773.2263
investor@chemours.com
Kurt Bonner Manager, Investor Relations +1.302.773.0026 investor@chemours.com
NEWS MEDIA Cassie Olszewski Media Relations and Financial Communications Manager +1.302.219.7140 media@chemours.com
EXHIBIT 99.1
The Chemours Company
Interim Consolidated Statements of Operations (Unaudited)
(Dollars in millions, except per share amounts)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Net sales | $ | 1,777 | $ | 1,680 | $ | 5,456 | $ | 4,770 | ||||
| Cost of goods sold | 1,345 | 1,253 | 4,042 | 3,782 | ||||||||
| Gross profit | 432 | 427 | 1,414 | 988 | ||||||||
| Selling, general, and administrative expense | 140 | 124 | 535 | 433 | ||||||||
| Research and development expense | 32 | 27 | 88 | 78 | ||||||||
| Restructuring, asset-related, and other charges | (1 | ) | 3 | 10 | 4 | |||||||
| Total other operating expenses | 171 | 154 | 633 | 515 | ||||||||
| Equity in earnings of affiliates | 16 | 12 | 44 | 32 | ||||||||
| Interest expense, net | (41 | ) | (45 | ) | (123 | ) | (142 | ) | ||||
| Gain (loss) on extinguishment of debt | 7 | (20 | ) | 7 | (20 | ) | ||||||
| Other income, net | 56 | 11 | 101 | 31 | ||||||||
| Income before income taxes | 299 | 231 | 810 | 374 | ||||||||
| Provision for (benefit from) income taxes | 59 | 17 | 135 | (1 | ) | |||||||
| Net income | 240 | 214 | 675 | 375 | ||||||||
| Net income attributable to Chemours | $ | 240 | $ | 214 | $ | 675 | $ | 375 | ||||
| Per share data | ||||||||||||
| Basic earnings per share of common stock | $ | 1.54 | $ | 1.30 | $ | 4.30 | $ | 2.26 | ||||
| Diluted earnings per share of common stock | 1.52 | 1.27 | 4.21 | 2.21 |
EXHIBIT 99.1
The Chemours Company
Interim Consolidated Balance Sheets (Unaudited)
(Dollars in millions, except per share amounts)
| December 31, 2021 | |||||
|---|---|---|---|---|---|
| Assets | |||||
| Current assets: | |||||
| Cash and cash equivalents | 1,167 | $ | 1,451 | ||
| Accounts and notes receivable, net | 980 | 720 | |||
| Inventories | 1,321 | 1,099 | |||
| Prepaid expenses and other | 75 | 75 | |||
| Total current assets | 3,543 | 3,345 | |||
| Property, plant, and equipment | 9,186 | 9,232 | |||
| Less: Accumulated depreciation | (6,115 | ) | (6,078 | ) | |
| Property, plant, and equipment, net | 3,071 | 3,154 | |||
| Operating lease right-of-use assets | 232 | 227 | |||
| Goodwill | 102 | 102 | |||
| Other intangible assets, net | 15 | 6 | |||
| Investments in affiliates | 186 | 169 | |||
| Restricted cash and restricted cash equivalents | 201 | 100 | |||
| Other assets | 395 | 447 | |||
| Total assets | 7,745 | $ | 7,550 | ||
| Liabilities | |||||
| Current liabilities: | |||||
| Accounts payable | 1,270 | $ | 1,162 | ||
| Compensation and other employee-related cost | 130 | 173 | |||
| Short-term and current maturities of long-term debt | 24 | 25 | |||
| Current environmental remediation | 210 | 173 | |||
| Other accrued liabilities | 317 | 325 | |||
| Total current liabilities | 1,951 | 1,858 | |||
| Long-term debt, net | 3,510 | 3,724 | |||
| Operating lease liabilities | 192 | 179 | |||
| Long-term environmental remediation | 482 | 389 | |||
| Deferred income taxes | 53 | 49 | |||
| Other liabilities | 272 | 269 | |||
| Total liabilities | 6,460 | 6,468 | |||
| Commitments and contingent liabilities | |||||
| Equity | |||||
| Common stock (par value 0.01 per share; 810,000,000 shares authorized; 195,178,578 shares issued and 153,078,931 shares outstanding at September 30, 2022; 191,860,159 shares issued and 161,046,732 shares outstanding at December 31, 2021) | 2 | 2 | |||
| Treasury stock, at cost (42,099,647 shares at September 30, 2022; 30,813,427 shares at December 31, 2021) | (1,604 | ) | (1,247 | ) | |
| Additional paid-in capital | 1,015 | 944 | |||
| Retained earnings | 2,304 | 1,746 | |||
| Accumulated other comprehensive loss | (433 | ) | (364 | ) | |
| Total Chemours stockholders’ equity | 1,284 | 1,081 | |||
| Non-controlling interests | 1 | 1 | |||
| Total equity | 1,285 | 1,082 | |||
| Total liabilities and equity | 7,745 | $ | 7,550 |
All values are in US Dollars.
EXHIBIT 99.1
The Chemours Company
Interim Consolidated Statements of Cash Flows (Unaudited)
(Dollars in millions)
| Nine Months Ended September 30, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| Cash flows from operating activities | ||||||
| Net income | $ | 675 | $ | 375 | ||
| Adjustments to reconcile net income to cash provided by operating activities: | ||||||
| Depreciation and amortization | 217 | 242 | ||||
| Gain on sales of assets and businesses, net | (27 | ) | (2 | ) | ||
| Equity in earnings of affiliates, net | (36 | ) | (31 | ) | ||
| (Gain) loss on extinguishment of debt | (7 | ) | 20 | |||
| Amortization of debt issuance costs and issue discounts | 7 | 6 | ||||
| Deferred tax provision (benefit) | 6 | (55 | ) | |||
| Asset-related charges | 5 | — | ||||
| Stock-based compensation expense | 24 | 24 | ||||
| Net periodic pension cost | 6 | 5 | ||||
| Defined benefit plan contributions | (9 | ) | (12 | ) | ||
| Other operating charges and credits, net | (24 | ) | 21 | |||
| Decrease (increase) in operating assets: | ||||||
| Accounts and notes receivable | (256 | ) | (343 | ) | ||
| Inventories and other operating assets | (259 | ) | (78 | ) | ||
| (Decrease) increase in operating liabilities: | ||||||
| Accounts payable and other operating liabilities | 272 | 434 | ||||
| Cash provided by operating activities | 594 | 606 | ||||
| Cash flows from investing activities | ||||||
| Purchases of property, plant, and equipment | (240 | ) | (194 | ) | ||
| Proceeds from sales of assets and businesses | 33 | — | ||||
| Foreign exchange contract settlements, net | 1 | (9 | ) | |||
| Other investing activities | (13 | ) | 1 | |||
| Cash used for investing activities | (219 | ) | (202 | ) | ||
| Cash flows from financing activities | ||||||
| Proceeds from issuance of debt | — | 650 | ||||
| Debt repayments | (64 | ) | (784 | ) | ||
| Payments related to extinguishment of debt | — | (18 | ) | |||
| Payments on finance leases | (9 | ) | (8 | ) | ||
| Payments of debt issuance cost | (1 | ) | (8 | ) | ||
| Purchases of treasury stock, at cost | (351 | ) | (80 | ) | ||
| Proceeds from exercised stock options, net | 51 | 15 | ||||
| Payments related to tax withholdings on vested stock awards | (4 | ) | (2 | ) | ||
| Payments of dividends to the Company's common shareholders | (117 | ) | (123 | ) | ||
| Distributions to non-controlling interest shareholders | — | (1 | ) | |||
| Cash used for financing activities | (495 | ) | (359 | ) | ||
| Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents | (63 | ) | (19 | ) | ||
| (Decrease) increase in cash, cash equivalents, restricted cash and restricted cash equivalents | (183 | ) | 26 | |||
| Cash, cash equivalents, restricted cash, and restricted cash equivalents at January 1, | 1,551 | 1,105 | ||||
| Cash, cash equivalents, restricted cash and restricted cash equivalents at September 30, | $ | 1,368 | $ | 1,131 | ||
| Supplemental cash flows information | ||||||
| Non-cash investing and financing activities: | ||||||
| Purchases of property, plant, and equipment included in accounts payable | $ | 42 | $ | 44 | ||
| Treasury Stock repurchased, not settled | 10 | 2 |
EXHIBIT 99.1
The Chemours Company
Segment Financial and Operating Data (Unaudited)
(Dollars in millions)
| Segment Net Sales | Three Months | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Ended | Sequential | ||||||||||||||||
| Three Months Ended September 30, | Increase / | June 30, | Increase / | ||||||||||||||
| 2022 | 2021 | (Decrease) | 2022 | (Decrease) | |||||||||||||
| Titanium Technologies | $ | 877 | $ | 908 | $ | (31 | ) | $ | 968 | $ | (91 | ) | |||||
| Thermal & Specialized Solutions | 417 | 318 | 99 | 518 | (101 | ) | |||||||||||
| Advanced Performance Materials | 450 | 356 | 94 | 401 | 49 | ||||||||||||
| Other Segment | 33 | 98 | (65 | ) | 28 | 5 | |||||||||||
| Total Net Sales | $ | 1,777 | $ | 1,680 | $ | 97 | $ | 1,915 | $ | (138 | ) | ||||||
| Segment Adjusted EBITDA | Three Months | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| Ended | Sequential | ||||||||||||||||
| Three Months Ended September 30, | Increase / | June 30, | Increase / | ||||||||||||||
| 2022 | 2021 | (Decrease) | 2022 | (Decrease) | |||||||||||||
| Titanium Technologies | $ | 137 | $ | 221 | $ | (84 | ) | $ | 216 | $ | (79 | ) | |||||
| Thermal & Specialized Solutions | 162 | 103 | 59 | 213 | (51 | ) | |||||||||||
| Advanced Performance Materials | 112 | 76 | 36 | 107 | 5 | ||||||||||||
| Other Segment | 3 | 14 | (11 | ) | (2 | ) | 5 | ||||||||||
| Corporate and Other | (51 | ) | (42 | ) | (9 | ) | (59 | ) | 8 | ||||||||
| Total Adjusted EBITDA | $ | 363 | $ | 372 | $ | (9 | ) | $ | 475 | $ | (112 | ) | |||||
| Adjusted EBITDA Margin | 20 | % | 22 | % | 25 | % | |||||||||||
| Quarterly Change in Net Sales from the three months ended September 30, 2021 | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| September 30, 2022 | Percentage Change vs. | Percentage Change Due To | |||||||||||||||
| Net Sales | September 30, 2021 | Price | Volume | Currency | Portfolio | ||||||||||||
| Total Company | $ | 1,777 | 6 | % | 18 | % | (5 | )% | (3 | )% | (4 | )% | |||||
| Titanium Technologies | $ | 877 | (3 | )% | 16 | % | (16 | )% | (3 | )% | — | % | |||||
| Thermal & Specialized Solutions | 417 | 31 | % | 25 | % | 8 | % | (2 | )% | — | % | ||||||
| Advanced Performance Materials | 450 | 26 | % | 23 | % | 9 | % | (6 | )% | — | % | ||||||
| Other Segment | 33 | (66 | )% | 6 | % | 1 | % | — | % | (73 | )% | ||||||
| Quarterly Change in Net Sales from the three months ended June 30, 2022 | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| September 30, 2022 | Percentage Change vs. | Percentage Change Due To | |||||||||||||||
| Net Sales | June 30, 2022 | Price | Volume | Currency | Portfolio | ||||||||||||
| Total Company | $ | 1,777 | (7 | )% | — | % | (6 | )% | (1 | )% | — | % | |||||
| Titanium Technologies | $ | 877 | (9 | )% | — | % | (8 | )% | (1 | )% | — | % | |||||
| Thermal & Specialized Solutions | 417 | (19 | )% | (3 | )% | (16 | )% | — | % | — | % | ||||||
| Advanced Performance Materials | 450 | 12 | % | 4 | % | 10 | % | (2 | )% | — | % | ||||||
| Other Segment | 33 | 18 | % | 5 | % | 13 | % | — | % | — | % |
EXHIBIT 99.1
The Chemours Company
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures (Unaudited)
(Dollars in millions)
GAAP Net Income Attributable to Chemours to Adjusted Net Income and Adjusted EBITDA Reconciliation
Adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”) is defined as income (loss) before income taxes, excluding the following items: interest expense, depreciation, and amortization; non-operating pension and other post-retirement employee benefit costs, which represents the components of net periodic pension (income) costs excluding the service cost component; exchange (gains) losses included in other income (expense), net; restructuring, asset-related, and other charges; (gains) losses on sales of businesses or assets; and, other items not considered indicative of the Company’s ongoing operational performance and expected to occur infrequently, including Qualified Spend reimbursable by DuPont and/or Corteva as part of the Company's cost-sharing agreement under the terms of the MOU that were previously excluded from Adjusted EBITDA. Adjusted Net Income is defined as net income (loss) attributable to Chemours, adjusted for items excluded from Adjusted EBITDA, except interest expense, depreciation, amortization, and certain provision for (benefit from) income tax amounts.
| Three Months Ended | Nine Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | September 30, | |||||||||||||
| 2022 | 2021 | 2022 | 2022 | 2021 | |||||||||||
| Net income attributable to Chemours | $ | 240 | $ | 214 | $ | 201 | $ | 675 | $ | 375 | |||||
| Non-operating pension and other post-retirement employee benefit income | (1 | ) | (2 | ) | (2 | ) | (4 | ) | (7 | ) | |||||
| Exchange (gains) losses , net | (13 | ) | (3 | ) | 3 | (11 | ) | 2 | |||||||
| Restructuring, asset-related, and other charges (1) | (2 | ) | 3 | — | 14 | 2 | |||||||||
| (Gain) loss on extinguishment of debt | (7 | ) | 20 | — | (7 | ) | 20 | ||||||||
| Gain on sales of assets and businesses, net (2) | — | (1 | ) | (26 | ) | (27 | ) | (2 | ) | ||||||
| Natural disasters and catastrophic events (3) | — | — | — | — | 19 | ||||||||||
| Transaction costs (4) | — | 2 | — | — | 7 | ||||||||||
| Qualified spend recovery (5) | (14 | ) | (12 | ) | (13 | ) | (41 | ) | (12 | ) | |||||
| Legal and environmental charges (6,7) | (12 | ) | 11 | 170 | 167 | 219 | |||||||||
| Adjustments made to income taxes (8) | (3 | ) | (14 | ) | (2 | ) | (9 | ) | (23 | ) | |||||
| Provision for (benefit from) income taxes relating to reconciling items (9) | 8 | (4 | ) | (29 | ) | (20 | ) | (62 | ) | ||||||
| Adjusted Net Income (10) | 196 | 214 | 302 | 737 | 538 | ||||||||||
| Interest expense, net | 41 | 45 | 40 | 123 | 142 | ||||||||||
| Depreciation and amortization | 72 | 78 | 72 | 217 | 242 | ||||||||||
| All remaining provision for income taxes (10) | 54 | 35 | 61 | 164 | 84 | ||||||||||
| Adjusted EBITDA | $ | 363 | $ | 372 | $ | 475 | $ | 1,241 | $ | 1,006 | |||||
| Adjusted effective tax rate (10) | 22 | % | 14 | % | 17 | % | 18 | % | 14 | % |
(1) In 2022, restructuring, asset related, and other charges primarily includes asset charges and write-offs resulting from the conflict between Russia and Ukraine and our decision to suspend our business with Russian entities. In 2021, restructuring, asset-related, and other charges primarily includes a net $9 gain resulting from contract termination with a third-party services provider at our previously owned Mining Solutions facility in Gomez Palacio, Durango, Mexico.
(2) Refer to “Note 6 – Other Income (Expense), Net” to the Interim Consolidated Financial Statements in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 for further details.
(3) In 2021, natural disasters and catastrophic events pertains to the total cost of plant repairs and utility charges in excess of historical averages caused by Winter Storm Uri.
(4) In 2021, includes cost associated with our accounting, legal and bankers' transaction costs incurred in connection with our sale of the Mining Solutions Business.
(5) Qualified spend recovery represents costs and expenses that were previously excluded from Adjusted EBITDA, reimbursable by DuPont and/or Corteva as part of our cost-sharing agreement under the terms of the MOU which is discussed in further detail in "Note 16 – Commitments and Contingent Liabilities" to the Interim Consolidated Financial Statements in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022.
(6) Legal charges pertains to litigation settlements, PFOA drinking water treatment accruals, and others. For the three and nine months ended September 30, 2022, legal charges include proceeds from a settlement in a patent infringement matter relating to certain copolymer patents associated with our Advanced Performance Materials segment. For the nine months ended September 30, 2021, legal charges include $25 associated with our portion of the costs to enter into a Settlement Agreement, Limited Release, Waiver and Covenant Not to Sue reflecting Chemours, DuPont, Corteva, EID and the State of Delaware’s agreement to settle and fully resolve claims alleged against the companies. See “Note 16 – Commitments and Contingent Liabilities” to the Interim Consolidated Financial Statements in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022.
(7) Environmental charges pertains to management’s assessment of estimated liabilities associated with certain non-recurring environmental remediation expenses at various sites. In 2022, environmental charges include $175 primarily related to an update to the off-site drinking water programs at Fayetteville and changes in estimates related to the barrier wall constructions. In 2021, environmental charges include $169 primarily related to the construction of the barrier wall, operation of the groundwater extraction and treatment system, and long-term enhancements to the old outfall treatment system. See “Note 16 – Commitments and Contingent Liabilities” to the Interim Consolidated Financial Statements in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 for further details.
(8) Includes the removal of certain discrete income tax impacts within our provision for income taxes, such as shortfalls and windfalls on our share-based payments, certain return-to-accrual adjustments, valuation allowance adjustments, unrealized gains and losses on foreign exchange rate changes, and other discrete income tax items.
(9) The income tax impacts included in this caption are determined using the applicable rates in the taxing jurisdictions in which income or expense occurred for each of the reconciling items and represents both current and deferred income tax expense or benefit based on the nature of the non-GAAP financial measure.
(10) Adjusted effective tax rate is defined as all remaining provision for income taxes divided by pre-tax Adjusted Net Income.
EXHIBIT 99.1
The Chemours Company
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures (Unaudited)
(Dollars in millions, except per share amounts)
GAAP Earnings per Share to Adjusted Earnings per Share Reconciliation
Adjusted earnings per share (“EPS”) is calculated by dividing Adjusted Net Income by the weighted-average number of common shares outstanding. Diluted Adjusted EPS accounts for the dilutive impact of stock-based compensation awards, which includes unvested restricted shares. Diluted Adjusted EPS considers the impact of potentially-dilutive securities, except in periods in which there is a loss because the inclusion of the potentially-dilutive securities would have an anti-dilutive effect.
| Three Months Ended | Nine Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | September 30, | ||||||||
| 2022 | 2021 | 2022 | 2022 | 2021 | ||||||
| Numerator: | ||||||||||
| Net income attributable to Chemours | $ | 240 | $ | 214 | $ | 201 | $ | 675 | $ | 375 |
| Adjusted Net Income | 196 | 214 | 302 | 737 | 538 | |||||
| Denominator: | ||||||||||
| Weighted-average number of common shares outstanding - basic | 155,376,422 | 165,113,024 | 156,224,802 | 157,149,738 | 165,627,861 | |||||
| Dilutive effect of the Company's employee compensation plans | 2,473,700 | 3,841,670 | 3,442,411 | 3,199,339 | 3,742,889 | |||||
| Weighted-average number of common shares outstanding - diluted | 157,850,122 | 168,954,694 | 159,667,213 | 160,349,077 | 169,370,750 | |||||
| Basic earnings per share of common stock | $ | 1.54 | $ | 1.30 | $ | 1.29 | $ | 4.30 | $ | 2.26 |
| Diluted earnings per share of common stock | 1.52 | 1.27 | 1.26 | 4.21 | 2.21 | |||||
| Adjusted basic earnings per share of common stock | 1.26 | 1.30 | 1.93 | 4.69 | 3.25 | |||||
| Adjusted diluted earnings per share of common stock | 1.24 | 1.27 | 1.89 | 4.60 | 3.18 |
EXHIBIT 99.1
The Chemours Company
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures (Unaudited)
(In millions, except per share amounts)
2022 Estimated GAAP Net Income Attributable to Chemours to Estimated Adjusted Net Income, Estimated Adjusted EBITDA and Estimated Adjusted EPS Reconciliation (*)
| (Estimated) | ||||
|---|---|---|---|---|
| Year Ended December 31, 2022 | ||||
| Low | High | |||
| Net income attributable to Chemours | $ | 691 | $ | 732 |
| Restructuring, transaction, and other costs, net (1) | 62 | 62 | ||
| Adjusted Net Income | 753 | 794 | ||
| Interest expense, net | 170 | 170 | ||
| Depreciation and amortization | 300 | 300 | ||
| All remaining provision for income taxes | 177 | 186 | ||
| Adjusted EBITDA | $ | 1,400 | $ | 1,450 |
| Weighted-average number of common shares outstanding - basic (2) | 155.6 | 155.6 | ||
| Dilutive effect of the Company's employee compensation plans (3) | 3.2 | 3.2 | ||
| Weighted-average number of common shares outstanding - diluted | 158.8 | 158.8 | ||
| Basic earnings per share of common stock | $ | 4.44 | $ | 4.70 |
| Diluted earnings per share of common stock (4) | 4.35 | 4.61 | ||
| Adjusted basic earnings per share of common stock | 4.84 | 5.10 | ||
| Adjusted diluted earnings per share of common stock (4) | 4.74 | 5.00 |
(1) Restructuring, transaction, and other costs, net includes the net provision for (benefit from) income taxes relating to reconciling items and adjustments made to income taxes for the removal of certain discrete income tax impacts.
(2) The Company’s estimates for the weighted-average number of common shares outstanding - basic reflect results for the nine months ended September 30, 2022, which are carried forward for the projection period.
(3) The Company’s estimates for the dilutive effect of the Company’s employee compensation plans reflect the dilutive effect for the nine months ended September 30, 2022, which is carried forward for the projection period.
(4) Diluted earnings per share is calculated using net income available to common shareholders divided by diluted weighted-average common shares outstanding during each period, which includes unvested restricted shares. Diluted earnings per share considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect.
(*) The Company’s estimates reflect its current visibility and expectations based on market factors, such as currency movements, macro-economic factors, and end-market demand. Actual results could differ materially from these current estimates.
EXHIBIT 99.1
The Chemours Company
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures (Unaudited)
(Dollars in millions)
GAAP Cash Flow Provided by Operating Activities to Free Cash Flows Reconciliation
Free Cash Flows is defined as cash flows provided by (used for) operating activities, less purchases of property, plant, and equipment as shown in the consolidated statements of cash flows.
| Three Months Ended | Nine Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | September 30, | |||||||||||||
| 2022 | 2021 | 2022 | 2022 | 2021 | |||||||||||
| Cash provided by operating activities | $ | 301 | $ | 311 | $ | 291 | $ | 594 | $ | 606 | |||||
| Less: Purchases of property, plant, and equipment | (72 | ) | (67 | ) | (62 | ) | (240 | ) | (194 | ) | |||||
| Free Cash Flows | $ | 229 | $ | 244 | $ | 229 | $ | 354 | $ | 412 |
2022 Estimated GAAP Cash Flow Provided by Operating Activities to Estimated Free Cash Flow Reconciliation (*)
| (Estimated) | ||
|---|---|---|
| Year Ended December 31, 2022 | ||
| Cash flow provided by operating activities | $ | >925 |
| Less: Purchases of property, plant, and equipment | ~(350) | |
| Free Cash Flows | $ | >575 |
(*) The Company’s estimates reflect its current visibility and expectations based on market factors, such as currency movements, macro-economic factors, and end-market demand. Actual results could differ materially from these current estimates.
Return on Invested Capital Reconciliation
Return on Invested Capital (“ROIC”) is defined as Adjusted EBITDA, less depreciation and amortization (“Adjusted EBIT”), divided by the average of invested capital, which amounts to net debt, or debt less cash and cash equivalents, plus equity.
| Twelve Months Ended September 30, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| Adjusted EBITDA (1) | $ | 1,548 | $ | 1,252 | ||
| Less: Depreciation and amortization | (294 | ) | (320 | ) | ||
| Adjusted EBIT | $ | 1,254 | $ | 932 | ||
| As of September 30, | ||||||
| 2022 | 2021 | |||||
| Total debt, net (2) | $ | 3,534 | $ | 3,854 | ||
| Total equity | 1,285 | 999 | ||||
| Less: Cash and cash equivalents | (1,167 | ) | (1,031 | ) | ||
| Invested capital, net | $ | 3,652 | $ | 3,822 | ||
| Average invested capital (3) | $ | 3,648 | $ | 3,804 | ||
| Return on Invested Capital | 34 | % | 25 | % |
(1) Reconciliations of net income (loss) attributable to Chemours to Adjusted EBITDA are provided on a quarterly basis. See the preceding table for the reconciliation of net income (loss) attributable to Chemours to Adjusted EBITDA.
(2) Total debt principal minus unamortized issue discounts of $4 and $6 and debt issuance costs of $24 and $30 at September 30, 2022 and 2021, respectively.
(3) Average invested capital is based on a five-quarter trailing average of invested capital, net.
EXHIBIT 99.1
The Chemours Company
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures (Unaudited)
(Dollars in millions)
Net Leverage Ratio Reconciliation
Net Leverage Ratio is defined as our total debt principal, net, or our total debt principal outstanding less cash and cash equivalents, divided by Adjusted EBITDA.
| As of September 30, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| Total debt principal | $ | 3,562 | $ | 3,890 | ||
| Less: Cash and cash equivalents | (1,167 | ) | (1,031 | ) | ||
| Total debt principal, net | $ | 2,395 | $ | 2,859 | ||
| Twelve Months Ended September 30, | ||||||
| 2022 | 2021 | |||||
| Adjusted EBITDA (1) | $ | 1,548 | $ | 1,252 | ||
| Net Leverage Ratio | 1.5x | 2.3x |
(1) Reconciliations of net income (loss) attributable to Chemours to Adjusted EBITDA are provided on a quarterly basis. See the preceding table for the reconciliation of net income (loss) attributable to Chemours to Adjusted EBITDA.
EX-99.2
EXHIBIT 99.2
Q3 2022 Earnings Prepared Comments
Jonathan Lock, The Chemours Company, Senior Vice President, Chief Development Officer
Welcome to The Chemours Company’s Third Quarter 2022 earnings conference call. I'm joined today by Mark Newman, President and Chief Executive Officer, and Sameer Ralhan, Senior Vice President and Chief Financial Officer.
Before we start, I’d like to remind you that comments made today, as well as the supplemental information provided in our presentation and on our website, contain forward-looking statements that involve risks and uncertainties, including the continuing impact of Covid-19 on our business and operations, and the other risks and uncertainties described in the documents Chemours has filed with the SEC. These forward-looking statements are not guarantees of future performance and are based on certain assumptions and expectations of future events that may not be realized. Actual results may differ, and Chemours undertakes no duty to update any forward-looking statements as a result of future developments or new information.
During the course of this call, management will refer to certain non-GAAP financial measures that we believe are useful to investors evaluating the company’s performance. A reconciliation of non-GAAP terms and adjustments are included in our release and at the end of this presentation.
With that, I’ll turn the call over to our CEO Mark Newman who will review the highlights from the third quarter - Mark?
EXHIBIT 99.2
Mark Newman, The Chemours Company, President and Chief Executive Officer
Thank you, Jonathan, and thank you for joining us today. I will begin my remarks on chart 3.
I’m excited to be reporting our results today as we delivered a solid quarter despite rising macroeconomic uncertainty and headwinds impacting our TT Segment. In APM and TSS, we are seeing continued momentum, which is consistent with the secular growth thesis we have been highlighting since we formed these two segments in 2021. In fact, both businesses came out of the starting blocks strong, and each is poised to have a record year in 2022.
As you are aware, TT has faced several key challenges this year, starting with the interruption of ore supplies out of Ukraine in February. I’m proud of how our TT team remained focused on our customers, and more recently pivoted to greater focus on cost reduction in the face of weaker demand. We remain committed to our TVS strategy and believe in the power of our business to provide more earnings stability through an economic cycle, even as we make adjustments in the coming quarters to respond to lower near-term demand.
I would like to thank the entire Chemours team for its unwavering dedication to the success of our customers, and their commitment to making this company one of the Greatest Places to Work. This year we achieved Great Place to Work certification in 10 countries, representing 90% of our entire workforce and continue to focus on building a culture of Courageous Chemistry at every site in the company.
Let’s move on to the highlights.
With three consecutive quarters of record Net Sales and Adjusted EBITDA, APM continues to deliver strong results. The segment has experienced record-setting performance driven by clean energy and advanced electronics applications demand.
TSS continues to have an excellent year, setting a 3rd quarter record for Net Sales and Adjusted EBITDA. Performance has been strong across the entire range of TSS products from refrigerants to foam and propellants.
EXHIBIT 99.2
We are seeing strong adoption of Opteon™ driven by demand for low GWP solutions. We anticipate this demand strength to continue, aided in part by regulatory dynamics and market driven innovation.
Our conviction in the secular growth potential of APM and TSS gives us the confidence to continue to invest in their long term growth. Last quarter we shared our plans to expand and de-bottleneck Opteon YF capacity at our Corpus Christi plant.
We are excited to build on this momentum with two more recent investment plans, both in APM. First, we announced a planned $200 million dollar investment to expand Nafion™ membrane capacity and capabilities. This expansion will allow us to support the rapid growth of Hydrogen which we believe could translate to a multi-billion dollar addressable market for electrolyzer and fuel cell membranes by 2030.
Second we announced the signing of a Joint Venture with BWT - Fumatech, that will accelerate the development of heavy duty fuel cell membranes. Our joint venture partner, BWT, is an established player in multiple hydrogen markets and is a leading manufacturer of specialized fuel cell membranes.
Even as we continue to invest for growth, we remain steadfast in our commitment to return the majority of our Free Cash Flow to shareholders. We returned $79 million dollars to shareholders in the third quarter via share repurchases. Year-to-date as of September 30th, we have repurchased $351 million dollars of shares. Cumulatively we have retired approximately 15% of our shares since the spin in 2015, net of equity dilution. I’m proud of our ability to invest in ourselves for growth AND our capacity for capital returns. I am confident this will create long term value for our shareholders.
Finally, we remain on track to deliver Adjusted EBITDA within our guidance range of $1.40 billion to $1.45 billion dollars and Free Cash Flow of greater than $575 million dollars. With that, I will turn things over to Sameer to review the financial results for the quarter. Sameer?
EXHIBIT 99.2
Sameer Ralhan, The Chemours Company, Senior Vice President, Chief Financial Officer
Thanks Mark. Let’s turn to Chart 4.
Net sales of $1.8 billion dollars were up 6% year-over-year and down 7% sequentially. Price increased 18%, partially offset by lower volumes of (5)% and currency headwinds of (3)% on a year-over-year basis. Portfolio change, driven by the sale of our Mining Solutions business in 2021, was a (4)% headwind on a year-over-year basis.
GAAP and Adjusted EPS were one dollar and fifty two cents per share ($1.52) and one dollar and twenty four cents per share ($1.24), respectively.
In the third quarter, adjusted EBITDA decreased by (2)% or $(9) million dollars to $363 million dollars, compared to $372 million dollars in the prior-year third quarter. Price continued to outpace cost in the third quarter, more than offset by headwinds from volume declines and stronger US Dollar relative to other currencies. I will go through the details on the next page.
We generated $229 million dollars of Free Cash Flow in the quarter, down $15 million dollars, or 6%, over the prior-year quarter. Free Cash Flow decline was primarily driven by lower earnings vs the prior-year quarter.
ROIC stands at 34% for the quarter, up from 25% in the prior-year quarter.
Chart 5: Adjusted EBITDA Bridge: 3Q22 vs. 3Q21
Turning to chart 5 – let’s review the Adjusted EBITDA bridge from the third quarter.
Third quarter 2022 Adjusted EBITDA was $363 million dollars, down $9 million dollars, or (2)% from the same period in 2021.
Price continued to outpace cost, primarily driven by contractual price changes, value-based pricing growth across the refrigerants portfolio, and increasing sales in high-value end-markets. We also continue to take customer level pricing actions to offset increased raw material and energy costs.
Volume was a headwind of 9% on year-over years basis as higher volume in APM and TSS segments were more than offset by lower volumes in TT.
EXHIBIT 99.2
Portfolio change, driven by the sale of our mining solutions business, was a headwind of $18 million dollars.
Currency headwinds totaled $37 million dollars, or 10%, in the quarter due to the strengthening of the US dollar. We expect this headwind to continue into the fourth quarter.
Increases in raw material, energy and logistics costs in the quarter contributed to higher overall costs on year-over-year basis.
Chart 6: Liquidity Position
Turning now to chart 6, our cash position, liquidity and balance sheet remain strong.
In the third quarter, our cash balance decreased from $1.25 billion dollars to $1.17 billion dollars.
Operating cash flow was $301 million dollars, a decrease of $(10) million dollars or 3% on year-over-year basis. The decrease in Operating Cash Flow was primarily driven by lower earnings. A total of $72 million dollars was spent on CAPEX, up vs. $67 million dollars in the prior-year quarter.
Debt reduction totaled $57 million dollars for the quarter, including $53 million dollars for open market repurchases of various portions of our senior unsecured notes. In total we repurchased notes totaling $61 million dollars of face value.
Escrow funding totaled $100 million dollars, as per the MOU agreement with DuPont and Corteva. Our next escrow payment per the MOU, is due in September of 2023. Future annual payments for the next six years will be $50 million dollars.
During the third quarter of 2022, we returned $118 million dollars of cash to shareholders through dividends of $39 million dollars and share repurchases of $79 million dollars. Shareholders of record on November 15, 2022, will receive a dividend of Twenty Five cents per share ($0.25) as approved by our Board of Directors on October 25th.
EXHIBIT 99.2
Our share count at the end of the third quarter was approximately 153 million shares, down 15% from approximately 181 million shares at the time of spin in 2015, net of equity dilution.
On a trailing twelve-month basis, net-leverage was 1.5 times, down from 1.6 times in the prior quarter. Total liquidity stands at $2.0 billion dollars, including revolver availability of approximately $800 million dollars, net of outstanding Letters of Credit. Our MOU related escrow balance is $201 million dollars in restricted cash, which is not included in these cash balances.
Chart 7: Titanium Technologies
Moving to the next chart, I will cover the business segment highlights, starting with Titanium Technologies.
In the Titanium Technologies segment, weak demand driven by macroeconomic uncertainty and rising raw material, energy, and logistics costs, are impacting our financial performance. Net sales of $877 million dollars were down (3)% on year-over-year basis.
As a result of contractual price changes, price increased 16% from the prior year and was flat sequentially.
Volume was down (16)% year-over-year and (8)% sequentially, driven primarily by lower demand in Europe and Asia.
Currency was a (3)% headwind vs the prior-year quarter and a (1)% headwind sequentially.
Adjusted EBITDA for the segment was down (38)% year-over-year to $137 million dollars. An increase in raw material, ore, logistics and energy costs, in addition to headwinds related to stronger USD against most currencies, resulted in adjusted EBITDA margins of 16%, down (800) basis points year-over-year.
We anticipate headwinds through the 4th quarter with volume impacts in excess of seasonal norms and continued escalation of raw material and input costs. Over the coming months, extended downtime is being taken to match production with demand. Additionally, measures will be taken to reduce fixed costs and maximize cash flow across the segment.
While we expect that the fourth quarter will be challenging, we remain confident that our Ti-Pure Value Stabilization strategy will continue to be a win-win for Chemours and our customers.
EXHIBIT 99.2
Chart 8: Thermal and Specialized Solutions
Moving to Chart 8, and our TSS segment.
Increased adoption of OpteonTMlow-GWP solutions and a value based pricing strategy drove a record 3rd Quarter for Thermal and Specialized Solutions.
We continue to see new partners adopt OpteonTM across a diverse array of needs around the globe.
Taking a closer look at the results, third quarter Net Sales increased 31% year-over-year to a 3rd Quarter record of $417 million dollars. Price was a 25% tailwind on a year-over-year basis, a result of regulatory and market dynamics, as well as steady value-based pricing growth through our refrigerants portfolio. Volume increased across almost all markets and was up 8% year-over-year due to the continued adoption of Opteon™ low-GWP refrigerants across nearly all regions and end-markets. Currency was a (2)% headwind over the prior-year.
Segment Adjusted EBITDA of $162 million dollars was up 57% from last year. Adjusted EBITDA Margins of 39% were an increase of 700 bps over the prior year, driven primarily by pricing and mix, partially offset by higher raw material costs. Adjusted EBITDA decreased $51 million dollars or (24) % on a sequential basis, primarily driven by seasonal demand as the Northern Hemisphere exits warm summer months.
Looking forward, we expect sequential price and volume declines in the fourth quarter, primarily driven by regional mix associated with typical seasonal refrigerant demand trends . Margins are also likely to be impacted by high raw material and logistics costs.
Chart 9: Advanced Performance Materials
Turning to chart 9, I’ll cover our Advanced Performance Materials segment.
In our APM segment, we provide differentiated, high-value applications that support secular trends in growing markets including clean energy, and advanced electronics.
For the quarter, our Net Sales were a record $450 million dollars. Sales increased 26% year-over-year and 12% sequentially in the third quarter, primarily due to a 23% improvement in prices. In the quarter, global average selling price increased due to increasing sales in high-value end markets, including advanced electronics and clean energy, as well as customer level pricing actions to offset increased raw material and energy costs.
EXHIBIT 99.2
Volume was up 9% year-over-year and up 10% sequentially primarily due to higher global customer demand across key markets, partially offset by supply chain challenges and lower demand in non-strategic end-markets where fade had been anticipated.
APM’s Adjusted EBITDA for the third quarter was a record $112 million dollars, an increase of $36 million dollars over last year's third quarter. Adjusted EBITDA margin improved 400 basis points to 25% from the prior-year quarter. This margin improvement is primarily driven by strong operating leverage, partially offset by higher raw material, logistics and energy costs, particularly in Europe.
Chart 10: APM Driving Secular Growth
Turning to chart 10.
Chemours is at the literal heart of the emerging hydrogen economy having invented the category of ion exchange materials. Nafion™ is a core material supporting both the production of hydrogen through green water electrolysis and the conversion of hydrogen to electricity in fuel cells. We are proud to be so central to the global effort to decarbonize industry.
As Mark said earlier in the call, we have recently announced plans for two critical investments to accelerate growth in Hydrogen which we believe will be a significant contributor to APM earnings in the later part of the decade. Our commitment to both investments illustrates our belief in the secular growth underpinning this segment and our commitment to helping solve the world’s biggest problems through the power of our chemistry. We look forward to sharing more about our Hydrogen plans and other exciting growth ventures soon.
With that I will turn things back over to our CEO, Mark Newman. Mark?
EXHIBIT 99.2
Mark Newman, The Chemours Company, President and Chief Executive Officer
Let’s now turn to Chart 11
In our preannouncement last month, we described headwinds in our TT segment, which led us to lower our previous full year guidance. Given the solid results in the third quarter, we continue to believe that we will be able to deliver Adjusted EBITDA within our guidance range of $1.40 billion to $1.45 billion dollars and Free Cash Flow of greater than $575 million dollars. This will be the third straight year that we have generated Free Cash Flow in excess of $500 million dollars, demonstrating the high earnings quality of the portfolio and our ability to thrive in any part of the economic cycle.
Chart 12: Our Priorities for Creating Shareholder Value
Finally on chart 12 - Our long-term focus continues to be maximizing shareholder value and we continue to invest behind our four critical priorities:
Priority 1 is to Improve TT earnings through the cycle, while growing with strategic customers. We have the best book of contracted business in our history and are now focused on additional steps that will reduce earnings and cashflow volatility through the cycle. We are adjusting to lower near-term demand but remain focused on realizing the long term benefits of our TVS strategy.
Priority 2 is to drive secular growth in TSS and APM through class-leading products and innovative chemistry. In TSS, our OpteonTMlow-GWP solutions continue to reach a broader global customer base. As the low-GWP regulatory journey here in the US continues, the refrigerant portfolio that we offer to our customers continues to grow in value.
EXHIBIT 99.2
Our APM business is at the heart of the material science driving advances in clean energy and advanced electronics, including supporting the growing demand for semiconductors. In many cases (such as Nafion™ membranes for Hydrogen, or Teflon PFA for semiconductor infrastructure), our products are unique solutions to society’s biggest challenges, and we are focused on manufacturing these products in the most sustainable way.
Priority 3 is to continue to manage and resolve legacy liabilities consistent with the Chemours/Dupont/Corteva MOU. With this agreement in place, we will continue to put legacy issues behind us, and work collaboratively with all stakeholders – including the communities in which we operate -- to ensure a sustainable future for Chemours.
Finally, Priority 4 is to Return the majority of the Free Cash Flow we generate to our shareholders through a steady diet of share repurchases and a stable dividend. Year-to-date we have repurchased $351 million dollars' worth of shares, and paid $117 million dollars in dividends, our belief that this approach to capital allocation helps to compound shareholder value creation over time.
Lastly, I cannot emphasize enough how hard our team has worked in these challenging times to drive results. In support of our growth strategies, we continue to invest to expand capacity and drive innovation. I believe that our people, and the power of our chemistry, will continue to deliver strong returns to shareholders well into the future.
Thank you