Chemours(US:CC)2022-05-02 16:00Part I Financial Information Interim Consolidated Financial Statements The company presents its unaudited interim consolidated financial statements for the three months ended March 31, 2022 Q1 2022 Consolidated Statement of Operations Highlights | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | YoY Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,764 | $1,436 | +22.8% | | Gross Profit | $486 | $297 | +63.6% | | Income before Income Taxes | $280 | $101 | +177.2% | | Net Income | $234 | $96 | +143.8% | | Diluted EPS | $1.43 | $0.57 | +150.9% | Notes to the Interim Consolidated Financial Statements Detailed notes disclose accounting policies, segment performance, debt structure, and significant litigation and environmental liabilities - The company operates through three reportable segments: Titanium Technologies, Thermal & Specialized Solutions, and Advanced Performance Materials26 - Total debt principal stood at $3.75 billion as of March 31, 2022, a slight decrease from $3.78 billion at year-end 202181 - During Q1 2022, the company repurchased 4.85 million shares for $146 million under its share repurchase program233 Net Sales by Segment (Q1 2022 vs Q1 2021) | Segment | Q1 2022 Net Sales (in millions) | Q1 2021 Net Sales (in millions) | YoY Change | | :--- | :--- | :--- | :--- | | Titanium Technologies | $928 | $723 | +28.4% | | Thermal & Specialized Solutions | $425 | $304 | +39.8% | | Advanced Performance Materials | $385 | $333 | +15.6% | | Other Segment | $26 | $76 | -65.8% | Commitments and Contingent Liabilities This note details significant legal and environmental contingencies, including a $4 billion cost-sharing MOU for legacy PFAS liabilities - In January 2021, Chemours entered a binding MOU with DuPont and Corteva to share potential future legacy PFAS liabilities up to an aggregate of $4 billion106107 - The company is named in approximately 2,400 matters related to Aqueous Film Forming Foam (AFFF) consolidated into a multi-district litigation135 - For the Fayetteville site, the company has accrued $286 million for on-site remediation and $80 million for off-site remediation189420 Environmental Remediation Liabilities (as of March 31, 2022) | Site | Liability (in millions) | | :--- | :--- | | Fayetteville Works, NC | $366 | | Pompton Lakes, NJ | $41 | | Chambers Works, NJ | $29 | | USS Lead, IN | $19 | | All other sites | $111 | | Total | $566 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q1 2022 performance, highlighting a 23% net sales increase to $1.8 billion driven by strong pricing and volume - The company announced the suspension of its business with Russian entities in March 2022 in response to the Russia-Ukraine conflict293 - The 2022 outlook expects capital expenditures to be approximately $400 million343 Drivers of Net Sales Change (Q1 2022 vs Q1 2021) | Driver | Percentage Change | | :--- | :--- | | Price | +25% | | Volume | +4% | | Currency | -2% | | Portfolio | -4% | | Total Change | +23% | Segment Reviews All primary segments reported strong year-over-year growth in net sales and Adjusted EBITDA, driven by robust pricing and demand Segment Adjusted EBITDA (Q1 2022 vs Q1 2021) | Segment | Q1 2022 Adjusted EBITDA (in millions) | Q1 2021 Adjusted EBITDA (in millions) | YoY Change | | :--- | :--- | :--- | :--- | | Titanium Technologies | $206 | $166 | +24.1% | | Thermal & Specialized Solutions | $174 | $90 | +93.3% | | Advanced Performance Materials | $88 | $58 | +51.7% | Liquidity and Capital Resources The company maintained a strong liquidity position with $1.1 billion in cash, while managing significant future outlays for debt and environmental costs - As of March 31, 2022, the company had total cash and cash equivalents of $1.1 billion346 - A PFAS escrow payment of $100 million is required on or before September 30, 2022, as per the MOU with DuPont and Corteva350 Cash Flow Summary (Q1 2022 vs Q1 2021) | Cash Flow Activity | Q1 2022 (in millions) | Q1 2021 (in millions) | | :--- | :--- | :--- | | Operating Activities | $2 | $39 | | Investing Activities | $(110) | $(77) | | Financing Activities | $(189) | $(42) | Environmental Matters The company details its environmental stewardship goals and significant remediation liabilities, totaling $566 million, with a focus on the Fayetteville site - The company has a Corporate Responsibility Commitment goal to reduce absolute Scope 1 and Scope 2 greenhouse gas emissions by 60% by 2030 and achieve net zero by 2050435 - Total environmental remediation liabilities were $566 million at March 31, 2022, with a potential additional liability up to approximately $660 million388389 - In Europe, an initiative to restrict a broad range of PFAS substances is underway, with potential restrictions entering force in 2025447 Quantitative and Qualitative Disclosures About Market Risk The company utilizes derivative financial instruments to mitigate market risks from foreign currency, interest rates, and commodity prices - The company uses foreign currency forward contracts to hedge against volatility in remeasuring non-functional currency assets and liabilities472 - Interest rate swaps are used to mitigate volatility in cash payments for interest on its U.S. dollar-denominated senior secured term loan facility475 - Euro-denominated debt is designated as a hedge of the company's net investment in certain European subsidiaries to reduce currency fluctuation volatility474 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2022 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period480 - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls481 Part II Other Information Legal Proceedings This section references ongoing legal proceedings related to PFOA, PFAS, and environmental issues at key facilities - The company is subject to numerous legal proceedings related to product liability, environmental, and other matters, with significant focus on PFOA and PFAS litigation484485 - An alleged criminal offense related to the Netherlands' Environmental Management Act regarding pre-spin use of PFOA is under investigation490 Risk Factors No material changes to the risk factors disclosed in the 2021 Annual Report on Form 10-K have been reported - No material changes to risk factors from the 2021 Form 10-K were reported494 Unregistered Sales of Equity Securities and Use of Proceeds The company details its Q1 2022 share repurchase activity, totaling $146 million under its authorized program Share Repurchase Activity (Q1 2022) | Metric | Value | | :--- | :--- | | Total Shares Purchased | 4,851,966 | | Average Price Paid per Share | $30.06 | | Total Amount for Shares Purchased | $146 million | | Remaining Authorization | $105 million |